I’m a little embarrassed to admit how I stumbled across our Bull of the Day. I was sitting here amongst the brain trust here in the Zacks office and we started talking about Fortune 500 companies with female CEOs. We came up with a bunch of names and I threw out Meg Whitman into the mix then I lazily typed “HP” into my charting software, completely forgetting the “Q” that’s supposed to follow, and pressed enter.
HOLY RUSTED METAL BATMAN! I almost fell off of my chair when the chart came up. After realizing I forgot the Q, I dug into our research and found that I had pulled an Alexander Flemming. That’s not Hewlett Packard, that Zacks Rank #1 (Strong Buy) is in fact Helmerich & Payne Inc (HP).
This HP doesn’t make computers, this HP is in the oil and natural gas business. Business has been good for the sector as a whole. The oil and gas drillers industry ranks in the top 27% of our Zacks Industry Rank. A big reason for this is all that activity going on in the Permian basin. There has been a recent jump in horizontal drilling in this section of the country. Currently this region has 63 of HPs rigs, with another 6 rigs contracted for this year.
The Permian Basin isn’t the only area of expansion for HP. Recently HP announced it is moving 10 existing rigs to Argentina under 5 year contracts in the Vaca Muerta. That’s right, Argentine oil production comes from a region named “Dead Cow.” There is so much potential in this region, some estimates have Argentina becoming a net exporter of fossil fuels in the near future. Currently Argentina imports half of its natural gas demand.
As for earnings, a whopping ten analysts have revised earnings estimates to the upside for next year driving up consensus from $5.91 a share to $6.75 a share. Consistent earnings growth over the last several years has helped take the stock from the mid-$40s in July 2012 to over $100 today. A quick look at the Price and Consensus charts shows the up and to the right movement we love to see at Zacks.
From a technical perspective, Helmerich & Payne has been a runaway train. I wish it was trading closer to the 25 day moving average shifted by 5 (25×5) that I use as a cornerstone of my technical analysis. Since November this average has provided support along the uptrend for HP. It has been so long since we saw an extreme oversold stochastic it seems like it will never happen again. We haven’t dipped below the 25 or below 20 on the stochastics since early September 2013 when the stock was trading near $65 a share, a far cry from the $106 level it trades at today. The last pullback we saw brought the stock down from just above $100 to $96, not really much in the way of a shake out at all. I’d feel a lot more comfortable scooping up shares closer to the $100 given the fact that we are at 52 week highs seemingly every day. However if earnings estimates keep heading higher then it appears HP will keep putting its money where its mouth is.
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