Atwood Oceanics (ATW) Short & Sweet Beat
I continue to knock on every piece of wood, artificial or otherwise, as we continue to stake through this earnings period without a major blowup. With so many positions this is a bit uncanny - and my assumption will be this only means next earnings period we'll be taking some body blows as what the market gives, she takes away soon enough. But for now we enjoy.
Deep sea oil driller Atwood Oceanics (ATW) reports a serious beat on the bottom line and a solid beat on the top line tonight. This continues the pattern in the sector and it only gets better from here as old contracts disappear and new contracts get signed at much higher rates. Analysts have estimated $6.71 for 2008 profits and $10.49 for 2009... I continue to believe this entire group is sadly undervalued as it's been treated as a CYCLICAL play as opposed to a SECULAR play... the latter should derive much higher valuations but as you know, crude is going back to $50 anyday now as the "dollar strengthens" and we stuff a few hundred million Indian, Chinese, and Brazilians back to the countryside and tell them "no progress for you!" So hence, these drillers are valued as if dayrates are going to plummet any quarter now...
The press release for the earnings report is short & sweet...
- Atwood Oceanics, Inc., (ATW), Houston-based International Drilling Contractor, announced today that the Company earned net income of $41,755,000 or $1.30 per diluted share, on revenues of $113,530,000 for the quarter ended March 31, 2008 compared to net income of $31,757,000 or $1.01 per diluted share, on revenues of $94,262,000 for the quarter ended March 31, 2007. For the six months ended March 31, 2008, the Company earned net income of $80,304,000 or $2.49 per diluted share, on revenues of $224,578,000 compared to net income of $52,842,000 or $1.67 per diluted share, on revenues of $183,062,000 for the six months ended March 31, 2007.
p.s. someone left a comment a few days ago about National Oilwell Varco (NOV) and why it was not moving.... my comment was, it was strange to me as well considering the move in crude - well we got her moving today with a 9% spike. Finally. (I took some off a bit too early in the day however)
Long both names mentioned in fund; no personal position
8 comments:
ATW isn't moving after hours, which I think is a little strange. I also thought it was a good beat at first glace, on rev and on margin.
ATW is not exactly a stock known by retail. I think maybe 10 guys who are not institutions own it. So why should institutions run it up after hours ;) It's just a quiet sleepy stock that no one notices.
RIG didn't really move on its blowout quarter either (the big moves before earnings essentially priced in the reports).
and, speaking of RIG, i'm curious as to why you don't seem to like it in the space? I personally think their merger with GSF makes them the obvious play due to their 'monopoly' (and i use that term very loosely) of the deep water space.
ATW
mkt cap: 3.37 billion
pe: 21.6
fpe: 10
peg: 0.44
operating margins: 41.7%
return on equity: 21.5%
RIG
mkt cap: 50 billion
pe: 11.1
fpe: 9.4
peg: 0.31
operating margins: 46.3%
return on equity: 32.2%
so, the way i see it is you're paying up in terms of valution for ATW's growth since they're much smaller than RIG. but, RIG still has a better peg despite being the larger of the two. Their margins and roe are better than ATW's, and they've been accelerating.
don't get me wrong I like ATW too and this might not be a totally fair comparison given the companiess market cap difference. but, RIG seems to dominate them up and down the board, not to mention their deep water rigs have very little gulf of mexico exposure and are mainly international. let me inside your head on this one, i'm confused. just like ATW's growth prospects more? did i miss something and are ATW's dayrates rising more on a % basis than RIG's?
*scratches head
I actually like RIG more than ATW aswell (seems to be trading slightly up now); I think the economies of scale really work in its favour, but anyways, I used the same growth rate for both companies on their '09 numbers and came up with a slightly favourable RIG PEG.
That being said, they do trade very close to each other in price and valuation. I think ATW tends to get a slight premium as its a take-over candidate to get into this 'monopoly' market.
The real question, is why are both trading with such tiny PEGs?
i tend to think that the PEG in this group is hinged on the fact that the perception is its a cyclical sector and that if oil trades way back down (as mark pointed out) that they won't have the earnings growth.
Hi guys
You did discuss some of the reasons
First I never said I did not like RIG. I owned GSF in the fall. Further some of your PEG ratios and the like are "now", not when I bought ATW in the fall. I also prefer the smaller company when given based on the takeout potential. And when I looked in the fall ATWs rigs were outside the Gulf of Mexico, mostly in Asia if I recall. Last, ATW has more of a deep sea profile than either GSF or RIG which had a lot more jackups and the like.
My comment on the low PEG was more sarcastic than anything else. Yes, I agree, that the perception that oil tanks, and sends these stocks down is there. That being said, it is why it will be a slow mover in the group.. not going to really pop with oil - not that it hasnt done really well already. But as long as oil remains high, I think the PEG S-L-O-W-L-Y moves up.
that being said, I took off my starter position in ATW this morning. I just dont like how oil looks so toppy to me, and these drillers will get hit. I still have RIG, however, but at very low exposure. Every time I see the commodities group sell off (like today - finally - CLF is off!) I get my hopes up for something deeper. But it doesnt show up.
overdue for a sell off in the group
just sitting and waiting with cash for now.
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