Drilling for Profits - Zacks Industry Rank Analysis
24 Août 2011 - 2:00AM
Zacks
Industry Rank Analysis 8-24-11
While the price of oil is off of its highs earlier this year, it is
still running much higher than it was a year ago, and at levels
where it is still very profitable for oil companies to go look for
it. While the Western economies have slowed, the emerging powers
like India and China continue to see robust growth. They are at the
stage of development where growth is very energy intensive.
China is now the largest auto market in the world, and virtually
every one of the cars sold there represents a net addition to its
auto fleet, rather than being a mostly replacement market as is the
case in the U.S. and Europe. That means each car sold today will be
burning gas for many years to come.
Over time, however, the easy oil has been mostly extracted. Oil
companies now have to search in more remote places and have to
drill much deeper. In other words, the oil service intensity of oil
exploration is rising. That provides a favorable long-term backdrop
for the Oil Field Service and Oil and Gas Drilling industries.
Zacks Industry Classifications
The Zacks industry classifications are very fine, with 256
different industries tracked. It is not particularly noteworthy if
a single small industry shows up doing well -- a single firm with
good news can propel a one or two firm "industry" to the top (or
bottom) of the charts.
It is interesting when you see a cluster of similar industries at
the top of the list. The same holds true for the bottom of the
list. The definition of size that matters here is not the total
sales or market capitalization but the number of companies in the
“industry.”
Top-Performing Oil & Gas Industries
Oil and Gas Drilling is the smaller of the two “industries” I am
highlighting today, with 18 firms. That is still a well above
average size for an industry. It is currently in 25th place, an
improvement of 16 spots from last week, with an average rank of
2.56, down from 2.61 last week.
The oil and Gas Service industry is much larger, not only in terms
of the number of firms (34) but also in the market capitalizations
of the firms involved. It is currently in 31st place, and improved
three spots on an unchanged average Zacks Rank of 2.59.
Significantly, the largest firms in the industry hold either #1 or
#2 ranks.
All told, or the 52 firms in these industries, 11 (21.2%) of them
hold the enviable Zacks #1 Rank, and an additional 9 (17.3%) have
Zacks #2 Ranks. If the Zacks ranks were random, then one would
expect that 5% of the names in an industry would be #1s and 15%
would be #2s.
There are three genuine large caps on the lists.
Halliburton (HAL) tops the list of Zacks #1 Ranked
firms, While
Schlumberger (SLB) and
Baker
Hughes (BHI) top the list of Zacks #2 Ranked firms. The
rest are all on the small side of mid cap, ranging down to firms
bordering on micro-cap size.
Valuations, particularly if you look out to 2012 earnings are
downright compelling. Every one of the number ones has a
single-digit P/E based on 2012 earnings. The estimate increases for
2012 earnings are mostly even bigger than those for 2011
earnings.
The combination of rapidly rising expectations, low valuations and
a very solid long-term thesis as to why these industries should
have a very bright future for a very long time to come could well
result in a gusher for your portfolio.
Number 1 Ranked Firms
Company |
Ticker |
Market Cap ($ mil) |
P/E Using Current FY Est |
P/E Using Next FY Est |
%Ch Curr FY Est - 4 wks |
%Ch Next FY Est - 4 wks |
Current Price |
Halliburton Co |
HAL |
$34,807 |
11.44 |
8.46 |
0.61% |
0.66% |
$38.04 |
Patterson-Uti |
PTEN |
$3,446 |
9.92 |
7.33 |
4.74% |
10.76% |
$22.34 |
Precision Drill |
PDS |
$3,238 |
12.36 |
8.36 |
7.95% |
17.10% |
$11.74 |
Rpc Inc |
RES |
$3,190 |
10.04 |
8.39 |
3.80% |
8.98% |
$21.50 |
Complete Produc |
CPX |
$1,946 |
8.67 |
6.34 |
4.11% |
11.55% |
$24.65 |
Key Energy Svcs |
KEG |
$1,790 |
12.89 |
7.19 |
12.57% |
18.27% |
$12.54 |
Helix Egy Solut |
HLX |
$1,532 |
11.36 |
9.09 |
53.45% |
41.65% |
$14.45 |
Basic Egy Svcs |
BAS |
$828 |
9.89 |
6.75 |
0.88% |
7.82% |
$19.62 |
Newpark Resour |
NR |
$651 |
10.22 |
8.36 |
2.65% |
4.69% |
$7.20 |
Parker Drilling |
PKD |
$592 |
11.07 |
7.12 |
42.24% |
21.50% |
$5.07 |
Tgc Industries |
TGE |
$112 |
5.81 |
4.47 |
0.00% |
0.00% |
$5.81 |
Number 2 Ranked Firms
Company |
Ticker |
Market Cap ($ mil) |
P/E Using Current FY Est |
P/E Using Next FY Est |
%Ch Curr FY Est - 4 wks |
%Ch Next FY Est - 4 wks |
Current Price |
Schlumberger Lt |
SLB |
$99,219 |
19.13 |
13.41 |
2.67% |
5.52% |
$73.12 |
Baker-Hughes |
BHI |
$23,827 |
12.75 |
9.33 |
3.31% |
6.67% |
$54.82 |
Core Labs Nv |
CLB |
$4,776 |
28.06 |
22.08 |
1.03% |
1.71% |
$104.80 |
Atwood Oceanics |
ATW |
$2,488 |
9.45 |
9.21 |
1.84% |
0.95% |
$38.40 |
Unit Corp |
UNT |
$2,090 |
10.95 |
9.02 |
3.70% |
2.12% |
$43.38 |
Seacor Hldgs |
CKH |
$1,812 |
22.02 |
11.54 |
2.70% |
0.00% |
$83.67 |
Gulfmark Offshr |
GLF |
$902 |
19.48 |
8.7 |
13.65% |
7.59% |
$34.05 |
Pioneer Drillng |
PDC |
$608 |
36.62 |
13.76 |
13.17% |
14.83% |
$11.19 |
Sinotech Energy |
CTE |
$155 |
3.56 |
2.26 |
3.94% |
0.00% |
$2.35 |
In evaluating the Zacks Industry Ranks, you want to see two
things: a good overall score (low, meaning more Zacks #1 and #2
Ranked stocks than #4 or #5 Ranked stocks) and some improvement the
relative position from the prior week. It is also helpful to
understand exactly what the Zacks Industry Rank is.
The Zacks Industry Rank is the un-weighted average of the
individual Zacks ranks of the firms in that industry. It does not
matter if the stock is the 800 lb gorilla that dominates the
industry or some very small niche player in the industry -- they
have the same influence on the industry rank.
Also, that means that the bigger the industry in terms of number of
firms, the less influence any given company has on the industry
rank. It also implies that small industries, with just two or three
firms, should be the ones found at either the top or the bottom of
the list. After all, if there are only two firms in the industry,
it is relatively easy to get a Zacks rank of 2.00 (i.e. one with a
Zacks Rank of #1 and the other with a #3). Right now, that industry
rank would be tied for 6th place among the 255 industries
tracked.
The same obviously goes for the bottom of the list as well. If
there are 50 firms in the industry, and it ends up at one of the
extremes, that means there has to be something pretty significant
going on. Thus, I do not always focus on the very highest rated
industries, but on the highest rated ones in which there are a
large number of firms.
Click here for the Zacks Industry Rank List:
http://www.zacks.com/zrank/zrank_inds.php
BAKER-HUGHES (BHI): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis Report
PRECISION DRILL (PDS): Free Stock Analysis Report
RPC INC (RES): Free Stock Analysis Report
SCHLUMBERGER LT (SLB): Free Stock Analysis Report
Zacks Investment Research
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