Oil States International: Value Stock Buy Alert

Oil States International continues to take advantage of a hot energy market as it saw second quarter revenues rise 26%. The company has beat Wall Street estimates 3 out of the last 4 quarters on average of 6.61%. Oil States has a forward P/E of 9.87.

Company Description

Oil States International, Inc. (OIS) manufactures products for deepwater production facilities and subsea pipelines, supplies oil producers with rental tools and provides land drilling services.

The company, a Zacks #1 Rank (Strong Buy), has two major divisions: Offshore Products and Well Site Services. Offshore Products manufactures deepwater capital equipment which is used on floating production platforms, subsea pipelines and floating drilling rigs.

Well Site Services provides land drilling with its fit-for-purpose drilling rigs, which are best suited for drilling shallow to medium depth development wells. Well Site Services is concentrated in West Texas, the Rocky Mountain region and Ohio.

The company rents tools to producers to be used in conjunction with wireline, coiled tubing, pressure pumping, flowback and well testing operations. Oil States’ rental tool division is focused on the Rockies, Barnett Shale, the Mid Continent and in the Fayetteville Shale oil producing regions.

Oil States Beat Wall Street Estimates by 15.46%

On July 31, Oil States reported second quarter earnings and surprised on estimates by 15.46%, or 15 cents per share. Net income was $60.2 million, or $1.14 per share, compared to $52.2 million, or $1.03 per share in the second quarter of 2007. Excluding charges the company reported $1.12 per share. Analysts expected 97 cents per share.

Revenues jumped 26% to $631.4 million from $499.3 million in the year ago period, excluding gains related to the partial sale of an investment in Boots & Coots International Well Control (WEL).

OIS is Bullish on the Third Quarter

Oil States saw revenue increases across all of its divisions. Well Site Services saw revenues increase 40% year over year. The Tubular Services group also posted record revenues. The company said the oil sands lodges contributed significant revenue growth.

OIS forecast earnings per share for the third quarter in the range of $1.19 to $1.24. Consensus estimates called for $1.11 per share 30 days ago.

Analysts Raise Third Quarter and Full Year Estimates

In response to the company’s solid second quarter and optimistic outlook, covering analysts have been raising estimates on both the third quarter and the full year. For the third quarter, estimates are up 12 cents in the last week to $1.24 per share, which is the upper end of the company’s guidance range.

For the year, estimates also rose in the last week, with 4 out of 7 covering analysts raising estimates by an average of 20 cents to $4.80 from $4.60 per share.

Value Fundamentals

Oil States has a forward P/E of 9.87. When we last reviewed the company on Feb 29, it had a forward P/E of 10.20. Its price-to-book is 2.07. Its five year average return on equity (ROE) is 17.67%.

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