NEW YORK (TheStreet) -- Shares of Nabors Industries (NBR - Get Report) are down 0.75% to $13.20 in pre-market trading today as BMO Capital Markets initiates coverage today on the Bermuda-based land drilling and well-servicing contractor with an "outperform" rating and a $16 price target.
"Our rating is driven by our bullish view of U.S. land activity in 2016, which we expect to increase 60% off the expected third quarter 2015 trough. While 2015 is going to be a tough year in North America, NBR has finally turned the corner with respect to international operations after years of disappointment," BMO Capital Markets said.
Analysts expect 2015 EBIT from the international segment to increase by about $40 million or 17%, analysts noted.
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This, coupled with contracted growth from Alaska, should help cushion 2015 results, analysts added.
Although BMO Capital Markets expects industry activity to decline 55% peak to trough, they expect a "V' shaped recovery in 2016. "Our cyclical E.R.A. framework suggests that now is the time to embrace the cycle and buy stocks with early cycle exposure like NBR," analysts concluded.
Separately, TheStreet Ratings team rates NABORS INDUSTRIES LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate NABORS INDUSTRIES LTD (NBR) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- NBR's revenue growth has slightly outpaced the industry average of 11.1%. Since the same quarter one year prior, revenues rose by 16.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NABORS INDUSTRIES LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in 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 ($1.18 versus $0.51).
- The gross profit margin for NABORS INDUSTRIES LTD is currently lower than what is desirable, coming in at 34.83%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 5.84% is above that of the industry average.
- NBR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 32.10%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, NBR is still more expensive than most of the other companies in its industry.
- You can view the full analysis from the report here: NBR Ratings Report