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Patterson-UTI Energy Inc. (PTEN): Zacks Rank Buy
On Friday September 23, 2011, 1:00 am EDT
The sell off in energy shares has created a big opportunity for value investors. Patterson-UTI Energy Inc. (NasdaqGS: PTEN - News) is still expected to see triple digit earnings growth this year and now shares are cheaper than ever. This Zacks #1 Rank (strong buy) has a forward P/E of only 8.5.
Patterson is in the thick of the action as its an onshore contract driller to exploration and production companies in North America.
The company's drilling segment has about 360 land-based drilling rigs that operate in the oil and natural gas regions of the US and western Canada. The pressure pumping segment provides pumping services in Texas and the Appalachian region.
Stellar Second Quarter
On July 28, Patterson-UTI reported its second quarter results and surprised on the Zacks Consensus for the 7th consecutive quarter. Earnings per share were 52 cents compared to the Zacks Consensus of 48 cents. It made just 19 cents in the year ago quarter.
Revenues nearly doubled to $600 million from $307 million last year as its U.S. drilling business continued to increase in the second quarter.
Average revenue per operating day rose by $760 to $21,000, compared to $20,240 for the first quarter of 2011.
Long-term contracts continued to increase, with 107 rigs operating under them in the second quarter. Based on contracts currently in place, it expects to have an average of about 122 rigs out of just over 200 rigs, under long-term contracts.
The pressure pumping segment also had a good quarter with revenue rising 11% sequentially. Due to demand, the company is adding fracturing capacity.
2011 Zacks Consensus Estimate Still Rising
Analysts have been ignoring the stock market chaos, and have been raising estimates over the last month. The 2011 Zacks Consensus Estimate has jumped 4 cents to $2.31 per share in the prior 30 days.
That is tremendous earnings growth of 220% as the company made only 72 cents in 2010.
Sell Off Creates An Opportunity
In early July, Patterson-UTI has broken out to new multi-year highs off its solid second quarter earnings report.
But since then, the overall stock market sell off has punished the shares, pushing them down to near 52-week lows.
Shares were already attractively priced before, but now they are even more so with the P/E plunging to only 8.5 and the price-to-book coming in at just 1.3, which is way below the 3.0 cut-off for value.
Investors will also get a dividend, now yielding 0.9%, for their loyalty.
Patterson-UTI has solid fundamentals, is in a 'hot' industry and is now cheap. What more could investors want?
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