Shares of Helmerich & Payne Inc. (HP) reached a 52-week high of $90.78 on Feb 14. In fact, the Tulsa, Oklahoma-based contract drilling services provider has seen its stock price climb over 40% during the past six months.
Despite this price appreciation, we remain optimistic about the firm’s near-term prospects, supported by its superior and diversified drilling fleet, continued strong operating performance led by an efficient management team, and an investor-friendly financial policy.
Why the Bullishness?
Helmerich & Payne is a major land and offshore drilling contractor in the western hemisphere, having the youngest and most efficient drilling fleet. The company has consistently surpassed the Zacks Consensus Estimate in the last 7 quarters and boasts strong revenues, earnings per share and dividend growth.
Helmerich & Payne – which counts Nabors Industries Ltd. (NBR) as one of its major competitors – recently paid quarterly cash dividend of 62.5 cents per share ($2.50 per share annualized), reflecting an increase of about 25% over the previous payout. The dividend hike not only highlights the company’s commitment to create value for shareholders but also underlines its strong cash generation capabilities.
We believe that the company’s technologically advanced FlexRigs are key contributors to its success. Helmerich & Payne recently announced that it has secured contracts to build and operate additional FlexRigs that would generate favorable returns.
Also worth noticing is the company’s client base, which mostly includes well-capitalized oil majors or large independents. This lends stability to the company’s operations.
Zacks Rank
All these factors are incorporated in Helmerich & Payne’s Zacks Rank #1 (Strong Buy), implying that it is expected to significantly outperform the broader U.S. equity market over the next one to three months.
In addition to Helmerich & Payne, one can consider other Zacks Ranked #1 players from the same industry such as New Source Energy Partners L.P. (NSLP) and Seadrill Partners LLC (SDLP).
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