It seems to be a wise idea to invest in Dril-Quip, Inc. DRQ stock now. The drilling service provider is well poised for profit growth, driven by realigned sales organization and supplier optimization. Moreover, its solid balance sheet position bodes well for the future.
Notably, analysts are bullish on the stock. The Zacks Consensus Estimate for the company’s 2019 earnings has been revised nearly 233% upward over the past 30 days. During this period, the stock has witnessed five upward revisions. As a result, the stock currently carries a Zacks Rank #2 (Buy).
The company’s price performance seems impressive as well. Year to date, the stock has rallied 51.9% against 18.2% decline of the industry it belongs to.
Let’s take a look at the factors that make us upbeat about the prospects of this $1.7-billion market cap company.
Dril-Quip is an attractive long-term investment option, as it manufactures highly engineered offshore drilling and production equipment for deepwater severe service applications, and for use in harsh environmental conditions. It has a strong backlog, which was $322 million as of Jun 30, 2019, up almost 6% sequentially.
By year-end 2019, Dril-Quip expects to have annualized savings in place of about $50 million. Notably, during the June quarter of 2019, the company achieved an additional $5 million of annualized costs savings, which brought the total annualized savings to around $29 million. It is on track to achieve its forecast and targets via geographical rationalization and supplier optimization.
The company’s realigned sales organization is also commendable. This commercial excellence helped Dril-Quip to report second-quarter 2019 adjusted earnings per share of 3 cents, beating the Zacks Consensus Estimate of a penny and improving from a loss of 24 cents in the year-ago period. This trait is expected to benefit the company in the upcoming quarters as well.
Dril-Quip has sound financial strength with no long-term debt, which will provide it with enough flexibility for future growth projects. Notably, Dril-Quip is expecting significant growth in liquid supply from deepwater resources through 2030. Being a leading provider of advanced drilling and production equipment, the company will likely clinch more orders in the years to come.
The company is focused on increasing its shareholders’ value. It has an ongoing share buyback program of $100 million. In first-half 2019, the company repurchased a total of $1 million worth of shares.
Other Key Picks
Other prospective players in the energy space are given below.
NuStar Energy L.P. NS is one of the largest independent liquids terminal and pipeline operators in the United States. Its third-quarter earnings per unit are expected to surge more than 100% year over year. It has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Enbridge Inc. ENB is a leader in energy transportation and distribution in North America and internationally. The Zacks Rank #2 company has not missed earnings estimates in the trailing four quarters. It delivered an average positive earnings surprise of 11.3% during this period.
TC PipeLines, LP TCP is a midstream energy firm operating in the United States. It outpaced earnings estimates thrice in the trailing four quarters, with an average positive surprise of 12.6%.
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