said in a research note that oil service stocks have fallen sharply for several reasons, including: mutual fund selling, to take profits before the fiscal year ends; concern that oil prices will fall from the current low $30s; and worry that natural gas prices will also fall, partly because of warm weather.
Merrill said that while the near-term weakness may persist before a widely anticipated decline in oil prices, it considers oil service stocks very strong buys at their current prices. "We believe that many stocks in the group can rise 50% or more over the intermediate-term," the note said.
The note said that there are particularly good opportunities among the mid-cap oilfield stocks. For those stocks, projected earnings multiples now average under the market for 2001 and predicted earnings growth averages over 30% a year for the next three to five years.
The brokerage cited such standouts as
, which is selling at 27 times the firm's 2001estimated EPS of $2.60;
, selling at 19 times its 2001 estimated EPS of $2.70; and
, selling at 22 times its 2001 estimated EPS of $1.65.
Bindley Western Industries
: UP to outperform from neutral at
Salomon Smith Barney
: UP to strong buy from buy at
Credit Suisse First Boston
: UP to strong buy from hold at
; price target: $30.
: 2000 EPS view DOWN to loss of 66 cents from loss of 33 cents at
; and 2001 EPS view to 10 cents from 40 cents.
: DOWN to hold from buy at CSFB and DOWN to neutral from outperform at
Morgan Stanley Dean Witter
: 2000 EPS view DOWN to a loss of 30 cents from loss of 22 cents at Goldman.
: DOWN to neutral from buy at
: DOWN to market perform from outperform at Goldman.
: DOWN to hold from buy at CSFB.
: NEW buy; price target: $26 at Salomon.
: NEW outperform at
Deutsche Banc Alex. Brown
started coverage of Internet software and services companies
Lehman raised its ratings on
Protein Design Labs
to outperform from neutral.
Salomon Smith Barney started coverage on five machinery companies:
- Deere (DE) - Get Report: NEW neutral; price target: $37.
Caterpillar (CAT) - Get Report: NEW neutral; price target: $37.
CNH Global (CNH) : NEW neutral; price target: $10.
Parker-Hannifin (PH) - Get Report: NEW outperform; price target: $44.
Ingersoll Rand (IR) - Get Report: NEW outperform; price target: $42.