Unit Corporation

Unit Corporation's (UNT - Snapshot Report) share price recently reversed its downward slide, bouncing from a key level and once again initiating its upward trajectory. The company's second-quarter results were awesome, and based upon analyst earnings projections, this stock looks very undervalued trading at these levels.

Unit Corporation operates as a contract drilling company. Unit is involved in the exploration of both crude and natural gas. The company was founded in 1963, has a market cap of $3.22 billion and is headquartered in Tulsa, Oklahoma.

In spite of the fact that oil has recently traded lower from its high of $147 a barrel, prices are still very high compared to historical norms. This dynamic continues to translate into big profits for energy company, and that was apparent when unit reported impressive second-quarter results on Aug 5.

Second-Quarter Results

Revenue increased 29% from last year to $370.1 million. Net income jumped to $94.1 million, up from $65.6 million last year, a 43% gain. This produced earnings of $2.00, ahead of analyst expectations by one penny.

Unit has surprised and beaten analyst estimates in each of the last four quarters, having done so by an average of four cents, or 2.79%.

Unit said that it was able to achieve a 21% increase in its total oil and natural gas production, and has 115 of its 131 drilling rigs currently under contract, an 88% utilization rate.

Analyst Estimates

With oil prices remaining high, analysts have upgraded the earnings projections of many energy companies, including unit. The current-year estimate now stands at $7.80 per share, up from $7.34 per share 90 days ago. The next-year estimate is pegged at $8.57 per share, a 10% earnings growth projection.

Valuations

Not only is Unit operating in a growth sector, it has carries extremely attractive valuations. Based upon the current-year projection, the company's forward P/E multiple is 8.7X, a huge discount to the overall market.

The Chart

Shares of Unit have traded lower over the last 6 weeks, but more recently have rebounded from a key support level and once again turned higher. The big picture with this stock is that it has the earnings to support much higher prices, and if oil accelerates, it will have even more strength behind it. Take a look at the chart below.