On Apr 9, Zacks Investment Research upgraded contract drilling services provider Helmerich & Payne Inc. (HP) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Helmerich & Payne has been witnessing rising earnings estimates owing to impressive first quarter fiscal 2013 (three months ended Dec 31, 2012) results that were backed by better drilling activities and innovative technological applications.
On Jan 31, 2013, the company reported earnings per share from continuing operations (excluding special items) of $1.40, surpassing the Zacks Consensus Estimate of $1.29. Compared with the year-ago adjusted profit, the results increased 8.5% from $1.29.
Revenues were $844.6 million, up 15.3% from the first quarter of fiscal 2012. The top line also surpassed our projection of $823.0 million.
With respect to the earnings trend, Helmerich & Payne delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 7.68%. Moreover, the company has been retaining shareholders’ confidence by returning wealth via share repurchases and dividend hikes. It has increased its quarterly common stock dividend by more than 100% to 15 cents per share (60 cents per share annualized).
Based on Helmerich & Payne’s consistency in earnings, attractive fundamentals and a positive outlook, the Zacks Consensus Estimate for the second quarter of fiscal 2013 has increased 2.4% to $1.28 per share over the last 60 days. For fiscal 2013, the Zacks Consensus Estimate has increased 3.09% over the same timeframe to $5.34 per share.
The long-term expected earnings and sales growth projections of 6.25% and 11.69%, respectively, are also fairly impressive.
We believe Helmerich & Payne’s technologically advanced FlexRigs is the key to its success, helping to increase its count of active rigs and maintain relatively strong daily-rate margins even during times of market uncertainty.
Other Stocks to Consider
There are other firms in the energy sector that are also performing well and are worth considering. These include Zacks Ranked #2 Continental Resources Inc. (CLR), Crimson Exploration Inc. (CXPO) and Plains Exploration & Production Company (PXP).
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