Oil States International: Riding The Oil Waves
Forward P/E: 8.51
Earnings Growth: 37%
Projected Sales Growth: 25%
Market Cap: $4.1 billion
Best Features: All divisions saw increases in first quarter.
Danger Zones: So much depends on the price of oil.
Oil States International, Inc., (NYSE: OIS) through its subsidiaries, provides specialty products and services to the oil and gas drilling and production companies worldwide. It operates in four segments: Accommodations, Offshore Products, Well Site Services, and Tubular Services.
Accommodations offers temporary and permanent work force accommodation services for people working in remote locations.
Offshore Products designs and manufactures flexible bearings and connector products; sub sea pipeline products; marine winches, mooring systems, and cranes and rig equipment; and conductor casing connections and pipes, as well as provides blowout preventer stack assembly, integration, testing, and repair services; and drilling riser and related repair services.
Well Site Services offers a range of products and services used to drill for, and establish and maintain the flow of oil and gas from a well throughout its lifecycle. This segment rents wireline and coiled tubing pressure control equipment; wellhead isolation equipment; pipe recovery systems; thru-tubing fishing services; hydraulic chokes and manifolds; blow out preventers; well testing and flowback equipment; gravel pack operations on well bores; and surface control equipment and down-hole tools utilized by coiled tubing operators. It also provides land drilling services.
Tubular Services distributes a range of casing and tubing products; and offers threading, logistical, and inventory management services. The company serves national oil companies, independent oil and gas companies, onshore and offshore drilling companies, and other oilfield service and mining companies. Oil States International, Inc. was founded in 1995 and is based in Houston, Texas. (For more stock ideas, see: www.theonlineinvestor.com)
Here's a company that can churn out earnings when things are good. Since 2009 when earnings per share (EPS) were $2.79, EPS registered $3.31 and $5.86. This year 12 analysts show a consensus estimate of $8.01, up 37%, then project $8.38 next year.
Of course, things aren't always good. In 2008, EPS was $5.88, then tanked to $2.79. The stock went from $64.80 to $11.10 in a matter of 10 months. Keep that in mind as you read the rest of this positive story.
First quarter results were impressive. Revenues jumped by 45% to $1.099 billion, up from $760.5 million in the first period of last year. All 4 divisions contributed to the better numbers. Accomodations showed record numbers, thanks to strong Canadian mobile camps and high lodge and village occupancy. Tubular set a record for shipments. It and Offshore Products had better margins thanks to higher prices. They're both benefitting from more drilling on U.S. lands and deepwater and shelf drilling in the Gulf of Mexico. EPS in the first quarter more than doubled to $2.43, well above the $1.13 in the first period of 2011.
That's all good news from the past. What about the future? It looks so bright you gotta wear shades. Backlog for orders is almost at record levels thanks to a large subsea pipeline equipment contract in Brazil. Management is also very positive on drilling offshore in West Africa and Southwest Asia. And because oil prices are so high, land drilling is expanding, usually in remote areas of Canada, Australia and the U.S. That means more accomodations are needed. Call the Accomodations department for help.
One concern is lower prices for natural gas. That curbs drilling which will affect the Rental Tool segment. Still analysts think there will be high capacity utilization and better pricing which should lead to higher margins this year.
The stock has been on a tear since early 2009 when the world was about to end, or so it seemed. That low point of $11.10 was quickly forgotten as the stock moved briskly ahead for the next 2 1/2 years, peaking at $87 in 2011, dropped to $44.80, only to recover and make a new high of $87.65 on February 24 of this year. The stock is currently showing weakness because oil prices have been hit hard over the last few weeks.
- Essential Numbers:
- Market Cap: $3.68 billion
- Trailng P/E: 9.96
- Price to sales ratio: .98
- Price to book: 1.75
- Operating margin: 16.22%
- Profit margin: 10.36%
- Return on equity: 20.49%
- Return on assets: 10.88%
- Revenues (last 12 months): $3.82 billion
- Total cash: $70.65 million
- Cash per share: $1.37
- Total debt: $1.2 billion
- Debt to equity: 56.23%
- Current ratio: 3.24
- Book value per share: $41.36
- Beta: 2.17
- 52 week change: 1.5%
- Shares outstanding: 51.64 million
- Float: 51.2 million
- Held by insiders: .95%
- Held by institutions: 105%
- There is no dividend.
If you're bullish on oil, you'll want to drill deeper into OIS. It's all about oil. And the more drilling there is, the more equipment it rents. But keep in mind that plunge the stock took in 2008. That was brutal for investors that bought in the $60 range, only to see it tank to $11. Can it happen again? As all investors know, anything can happen.
- Company Web site: www.oilstatesint.com
- Ted Allrich
May 17, 2012
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