After Weatherford's selling its Russian land drilling and workover operations to Rosneft, Weatherford's Russian exposure has been cut by more than half -- from 7% of revenue to 3%. And with Russian sanctions affecting the likes of Exxon Mobil (XOM - Get Report) and BP (BP) , Weatherford, which secured $500 million in cash from the deal, looks poised to outperform both in the near and short term.
The stock closed Friday at $22.39, down 0.36%. But the real story is that Weatherford has posted year-to-date gains of 44%, quadrupling the energy sector's 11% gain, according to Morningstar. But it's not yet time to cash in.
Aside from the benefits of the Rosneft deal and the $500 million cash infusion, Weatherford's management is actively rebuilding the business. And the turnaround has only just begun. Divesting the land drilling and workover operations is one example of how management is getting rid of low-margin businesses and spinning off noncompetitive assets.
From my vantage point, despite the stock's already strong year-to-date gains, Weatherford still looks cheap. These shares should reach $30 in the next 12 to 18 months.
Consider that -- based on next year's earnings estimates of $1.76, according to Yahoo -- Weatherford is trading at a price-to-earnings ratio of 12. According to Yahoo, the industry average P/E is 20. Rival Schlumberger (SLB) , which I happen to like, is trading at a forward multiple of 16.