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Key Energy Services (KEG): Zacks Rank Buy

Bill Wilton

Key Energy Services (NYSE:KEG - News) is coming off of a great earnings surprise. Estimates are moving decisively higher, but shares are getting caught in the broad sell off. Is this a good time to scoop up some oversold shares of this Zacks #1 Rank (Strong Buy).

Company Description

Key Energy Services is an onshore rig-based oil and gas well servicing company. They offer maintenance, workover and recompletion of existing wells and plugging tapped out wells. Other services included fluid and logistics, fishing, rental and drilling.

Keeps Getting Better

The most recent quarterly report came out on Jul 28 and it was another surprise for Key Energy. The company made $0.23 per share, 3 cents higher than expected and gave them back to back surprises.

Revenues spiked 66% to $445.4 million, from $267.8 million. Management expects revenues to increase 50-55% for 2011, compared to the 40-45% they were previously forecasting.

Analysts Expecting Even More

After the earnings release analysts continued to raise their estimates. The consensus was rising into the number and is now up another 11 cents, to $0.97 in the past week. Next year's average projection is at $1.66, up 19 cents.

Last year Key Energy lost $0.13 per share, so this is quite a turnaround.

New Acquisition

In mid July the company said that it is buying Edge Oilfield Services and Summit Oilfield Services fro $300 million. The deal will be financed with a 7.5 million share issue and $164 million in cash. The 2 acquisitions rend hydraulic fracturing equipment.

Buy on the Dip?

Along with everything else out there, shares of KEG have been pummeled this past week. It is starting to look oversold and could be a great chance to buy on the weakness.

Read the June 7th Feature Here

Key Energy Services - ticker KEG >

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service

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