After months of trading sideways, the price of West Texas Intermediate finally has worked its way back across the $50 mark, and with Brent crude trading close to the $60 level, some energy investors are starting to get excited. All eyes on Wall Street are now on OPEC, as the cartel will meet on November 30 to discuss continuing the production cuts that have helped lift oil prices back to the current levels.
In a new JPMorgan research report, the oil services team makes the case that overall sentiment on oil services has somewhat improved, and investors are cheering the strong global oil demand. In addition, expectations for shale output have been somewhat tempered.
The analysts stick with five top pick companies, all of which have solid upside potential and remain rated Overweight.
This company is still down almost 25% from highs printed for this year in January, and it remains a top large cap oil services pick. Halliburton Co. (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry. It serves the upstream oil and gas industry throughout the life cycle of the reservoir, from locating hydrocarbons and managing geological data to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.
Halliburton is the second-largest provider of oil services and the number one player in pressure pumping services worldwide. For investors looking for an oilfield services company to add, this is arguably the best, and analysts feel it will be a huge benefactor as the frac market has tightened significantly and prices are 20% to 30% off the lows.
The company reported strong third-quarter results this week that included continued revenue growth coupled with expanding operating margins, which led to a nearly 500% increase in operating income and better-than-expected earnings.
Shareholders receive a 1.77% dividend. The JPMorgan price target for the shares is $54, and the Wall Street consensus target is $53.12. The shares traded early Friday at $41.25.
This is another large cap company that the analysts remain positive on. Technip FMC PLC (NYSE: FTI) is a U.K. company and a global leader in subsea equipment and onshore and offshore engineering and construction projects. It also has activities on the surface, including drilling and well services.
The company released its third-quarter results earlier this week. Revenues totaled about $4.1 billion in the quarter, which was down 18% from $5.0 billion recorded in the same quarter of 2016. Despite a higher U.S. rig count, the company’s revenues for the quarter decreased, mostly due to lower subsea revenues. However, compared to the second quarter of this year, Technip FMC’s revenues improved a very solid 8%.
JPMorgan has a whopping $40 price target, while the consensus figure is $35.91. Shares traded Friday at $26.60.
This top mid-cap pick has traded sideways for the better part of this year. Core Laboratories N.V. (NYSE: CLB) provides reservoir description, production enhancement and reservoir management services to the oil and gas industry in the United States, Canada and internationally.
The company also reported very solid third-quarter results. Adjusted earnings per share beat the consensus estimate and compared favorably with the prior-year quarter adjusted earnings. Total revenue of $166 million also surpassed the consensus estimate and was up sequentially. The better-than-expected results were driven by improved performance of the Product Enhancement segment.
Shareholders receive a 2.36% dividend. The $117 JPMorgan price target compares with the consensus target of $112.87. The shares were last seen at $92.25.
This small cap play may be attractive to more aggressive accounts. MRC Global Inc. (NYSE: MRC) is an industrial distributor of pipe, valves and fittings and related products and services to the energy industry in the United States, Canada and internationally.
The company provides such services as product testing, manufacturer assessments, daily deliveries, volume purchasing, inventory and zone store management and warehousing, technical support, training, just-in-time delivery, truck stocking, order consolidation, product tagging and system interfaces customized to customer and supplier specifications for tracking and replenishing inventory, engineering of control packages and valve inspection and repair.
The company is expected to report quarterly results in early November. The analysts remain positive for the outcome.
JPMorgan has set its price objective at $23. The consensus target price is $21.25, and shares traded at $16.50.
This smaller cap stock also could be a solid play for aggressive accounts. ProPetro Holding Corp. (NYSE: PUMP) provides hydraulic fracturing and other complementary services to upstream oil and gas companies, which are engaged in the exploration and production of North American unconventional oil and natural gas resources.
The company operates through seven segments focused on hydraulic fracturing, cementing, acidizing, coil tubing, flowback, surface drilling and Permian drilling. Its operations are focused in the Permian Basin, and ProPetro’s fleet consists of 10 hydraulic fracturing units with an aggregate of 420,000 hydraulic horsepower.
ProPetro also will report earnings in the first week in November, and the whisper around Wall street is very positive.
The JPMorgan price objective is $20. The consensus price target is $18.90, and shares were last seen at $13.90.
Five top pick stocks for investors for the rest of 2017 and 2018. If oil can hold the $50 a barrel level and the OPEC production cuts stay in place, the coming months could prove to be very strong for these five well-situated companies.