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Why Nabors Industries (NBR) Stock Climbed on Tuesday

Stocks in this article: NBR

NEW YORK (TheStreet) -- Nabors Industries (NBR) closed higher on Tuesday after RBC Capital upped its price target to $29 from $25.

By market close, shares had gained 3.4% to $24.86, a touch lower than its 52-week high of $24.97 which it hit earlier in the day.

The firm kept an "outperform" rating on the oil and gas contractor, noting positive growth in domestic land drilling as well as an improving international operations profile.

On Monday, Nabors said it expected first-quarter earnings to fall below previously-issued guidance. The company forecasts net income of 7 cents a share for the three months to March, 11 cents lower than analysts surveyed by Thomson Reuters had expected. 

"Approximately 60% of our pressure pumping horsepower operates in the Northern region, which includes basins in the Rocky Mountains and Appalachia. Severe winter weather in those areas continued to affect our pumping operations through February and into early March," said CEO Tony Petrello in a statement.

"We view the first quarter's operating performance in Completion Services as temporary. Weather notwithstanding, improving underlying demand for pressure pumping gives us a constructive, though tempered, outlook for this business through the remainder of 2014," he continued.

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

"We rate NABORS INDUSTRIES LTD (NBR) a BUY. This is driven by a number of strengths, 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, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. 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.
  • Compared to its closing price of one year ago, NBR's share price has jumped by 50.03%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • 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 ($1.15 versus $0.51).

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