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Why Morgan Stanley Upgraded Nabors Industries (NBR) on Thursday

Stocks in this article: NBR

NEW YORK (TheStreet) -- Morgan Stanley upgraded Nabors Industries  (NBR) to "overweight" with a $28 price target on Thursday. The investment firm said the stock has underperformed its peers, but macro issues appear to have troughed and execution is improving. 

Must Read: Nabors Industries (NBR) Reports Fourth Quarter

TheStreet Ratings team rates NABORS INDUSTRIES LTD as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate NABORS INDUSTRIES LTD (NBR) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 443.9% when compared to the same quarter one year prior, rising from $27.83 million to $151.35 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.2%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 35.73% is the gross profit margin for NABORS INDUSTRIES LTD which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.41% trails the industry average.
  • NABORS INDUSTRIES LTD's earnings per share declined by 6.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, NABORS INDUSTRIES LTD reported lower earnings of $0.51 versus $0.80 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus $0.51).
  • NBR's debt-to-equity ratio of 0.65 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.45 is sturdy.

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