On Feb 25, Zacks Investment Research upgraded Hamilton, Bermuda-based onshore contract driller Nabors Industries Ltd. (NBR) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Nabors’ strong fourth quarter numbers, together with the improving market outlook, make it a great stock to own.
Detailed Analysis
Nabors, which ranks ahead of Patterson-UTI Energy Inc. (PTEN) as the largest North American onshore contractor, has a large, high-quality fleet of drilling and workover rigs. Over the years, the company has grown through cash flow reinvestments and acquisitions. In the process, Nabors has not only increased its rig fleet, but also extended its geographic reach and diversified its operating assets beyond land rigs.
The company reported fourth quarter earnings from continuing operations (excluding tax benefits) of 26 cents on Feb 18, beating the Zacks Consensus Estimate by 30%. Revenues of $1,606.5 million were also up from the previous-year figure of $1,602.0 million. The outperformance was primarily due to impressive gains from international operations. Shares of the company popped more than 13% following the stellar numbers. Nabors added that domestic drilling fundamentals have improved considerably, with pricing and utilization expected to be strong during the near future
Finally, we welcome the company’s last year’s announcement to start paying out a portion of its earnings in the form of shareholder dividends. We believe that the dividend start-up not only highlights Nabors’ commitment to create value for shareholders but also underlines the energy equipment supplier’s confidence in its business going forward.
Other Stocks to Consider
Apart from Nabors, investors interested in the ‘Oil & Gas Drilling’ sector may consider stocks like Helmerich & Payne Inc. (HP) and Seadrill Partners LLC (SDLP). Both of them carry a Zacks Rank #1 (Strong Buy) and offer even better return than Nabors.
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