AmTrust Financial Services, OM Group, Patterson-UTI Energy, Pioneer Energy Services and Nabors Industries highlighted as Zacks Bull and Bear of the Day
CHICAGO, Aug. 28, 2014 /PRNewswire/ -- Zacks Equity Research highlights AmTrust Financial Services (Nasdaq: AFSI-Free Report) as the Bull of the Day and OM Group (NYSE: OMG-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onPatterson-UTI Energy Inc. (Nasdaq: PTEN-Free Report), Pioneer Energy Services Corp. (NYSE: PES-Free Report) and Nabors Industries Ltd. (NYSE: NBR-Free Report).
Here is a synopsis of all five stocks:
AmTrust Financial Services (Nasdaq: AFSI-Free Report) delivered a strong second quarter beat on August 7, prompting analysts to revise their estimates significantly higher for both 2014 and 2015. This sent the stock to a Zacks Rank #1 (Strong Buy).
Although shares have already enjoyed nice gains so far this year, the stock trades at just 9x forward earnings. Given the strong earnings momentum and growth projections - along with relatively low interest rate risk - AmTrust still offers investors plenty of upside from here.
AmTrust is a property and casualty insurer that specializes in coverage for small businesses. The company provides insurance coverage for products with high volumes of insureds and loss profiles that it believes are predictable. It offers workers' compensation insurance, extended warranty coverage, specialty middle-market property and casualty insurance and several related products and services.
AmTrust delivered better-than-expected second quarter results on August 7. Adjusted earnings per share came in at $1.34, crushing the Zacks Consensus Estimate of $1.01. It was a 79% increase over the same quarter last year.
Gross written premium jumped 39% year-over-year to $1.44 billion due in large part to a reinsurance agreement with Tower International Group.
Investment income, excluding net realized gains and losses, soared 44% year-over-year to $32.6 million.
OM Group (NYSE: OMG-Free Report) recently delivered disappointing second quarter results, and management lowered its full year EBITDA forecast. This prompted analysts to revise their earnings estimates significantly lower for the company, sending the stock to a Zacks Rank #5 (Strong Sell).
While shares have sold off year-to-date, they still do not look like a value at 22x forward earnings and 2.5x tangible book value, both of which are above their historical multiples.
OM Group calls itself a "technology-driven diversified industrial company serving attractive global markets." The company reports its results in four segments:
- Magnetic Technologies (46% of net sales year-to-date)
- Specialty Chemicals (28%)
- Battery Technologies (15%)
- Advanced Materials (11%)
The Magnetic Technologies segment makes industrial-use magnetic materials used in several different end markets. The Specialty Chemicals segment produces chemicals for electronic applications, industrial applications and photomasks. And the Battery Technologies segment provides advanced batteries, battery management systems, and energetic devices for defense, space and medical markets.
OM Group recently divested of its Advanced Materials business.
OM Group delivered disappointing second quarter results on August 1. The company reported adjusted EPS of 28 cents, well below the Zacks Consensus Estimate of 41 cents.
Net sales for Q2 were $297.5 million. Excluding the divested Advanced Materials business, net sales increased slightly to $253.8 million. Sales growth in the Magnetic and Battery Technologies segments were somewhat offset by a decline in Specialty Chemicals.
Drill for Profits with These 3 Onshore Plays
It's usually the offshore drillers that are in news. There is a certain lure associated with drilling under the ocean, which calls for the hype surrounding them. However, being an offshore driller is just not very rewarding right now. Year-to-date, shares of major companies have significantly underperformed the broader market. What's more, according to some analysts, the worst is still to come for these drillers. (Read More: Offshore Drilling: Rough Seas Ahead.)
On the other hand, their onshore counterparts are in the middle of a bull run, benefiting from the U.S. shale bonanza.
Shale-driven Demand Backed by Rising E&P Capex
Thanks to the emergence of major shale plays yielding impressive results over the last few years, there has been an overwhelming requirement for more and more complex drilling. This has fueled huge demand for new premium land rigs, in the process placing the industry's top drillers at a competitive advantage by offering more powerful and sophisticated units.
Land-based drillers in the U.S. are also getting help from the exploration and production (E&P) companies, which continue to ramp up their budgets for equipment used to tap the oil and gas deposits.
Oil-directed Horizontal Drilling
Two years ago, onshore drillers were under severe pressure, when natural gas prices dived to a 10-year low on oversupply concerns. However, as part of strategy realignment since then, upstream firms have concentrated more on oil-based drilling with the commodity's price remaining relatively high.
There has also been a shift toward horizontal drilling, as the oil companies realized that it improved well productivity and economics considerably. Moreover, firms providing innovative technologies like horizontal drilling could charge higher rates for their offerings.
Rig Counts & Dayrates on the Rise
As a result, rig counts continue to rise, especially the horizontal oil-directed ones – that encompass new technology to drill and extract crude from onshore shale formations – at the expense of the vertical gas-directed units. Per the latest weekly release from Houston-based oilfield services company Baker Hughes Inc., horizontal rigs are just 8 shy of all-time high figure of 1,329. The efficiency of these units in drilling the more challenging wells also means higher dayrates and margins.
3 Stocks to Consider Buying
For investors wanting to take advantage of the land drilling growth, we present three companies that may deserve attention. Each of them also has a good Zacks Rank.
Patterson-UTI Energy Inc. (Nasdaq: PTEN-Free Report): It is one of the largest onshore contract drillers in the U.S. with approximately 216 land-based rigs that operate primarily in the oil and natural gas producing regions of North America. This Houston-TX based Zacks Rank #1 (Strong Buy) company's growing premium land rig fleet and the expected demand growth for such services helped it deliver positive surprises in 3 of the last 4 quarters with an average beat of 25.86%. With its technologically-advanced 'Apex' rigs – that command higher dayrates and utilization – making up around 65% of its total fleet, Patterson-UTI is nicely poised to further expand into the shale-drilling market.
Pioneer Energy Services Corp. (NYSE: PES-Free Report): Another Zacks Rank #1 stock, Pioneer Energy provides onshore contract drilling and production services to upstream oil and gas companies. Formerly known as Pioneer Drilling Co., it supplies rigs to operators in the prolific regions in Texas, Louisiana, Mid-Continent, Rocky Mountain, and Appalachian. With trailing 4 quarters average positive surprise of an impressive 122%, this San Antonio, TX-headquartered driller is set to grow revenue and earnings faster than its competitors on the back of a 90% utilization rate and its presence in key U.S. markets – Bakken shale, Eagle Ford shale and the Permian.
Nabors Industries Ltd. (NYSE: NBR-Free Report): Hamilton, Bermuda-based Nabors conducts oil, gas, and geothermal land drilling operations and is the largest land-drilling contractor in the world. Having done a stellar job at garnering leading positions in most natural gas and oil-based shale plays, analysts are predicting strong earnings growth for Nabors over the next couple of years. The 2014 Zacks Consensus Estimate is $1.23, representing 40% earnings per share growth over 2013. Next year's average forecast is $2.24, corresponding with 81% growth. Nabors currently has a Zacks Rank #2 (Buy).
As land drilling activity continues to prosper, the higher demand will improve pricing across the fleet. The biggest benefactor would be the companies with presence in the high-growth onshore shale plays. This is why the above-mentioned stocks would make good additions to your portfolio.
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