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Analyst Blog

On Dec 24, Zacks Investment Research upgraded oil drilling equipment maker, Cameron International Corp. (CAM - Analyst Report) to a Zacks Rank #3 (Hold).

Why the Upgrade?

Houston, Texas-based Cameron has a strong backlog that provides ample visibility to its earnings growth and cash flow prospects and also acts as a cushion in the current uncertain environment.  We also view the company’s diversified business portfolio and strong balance sheet as positives.

Earlier in the month, Cameron announced an increase in its share repurchase program by $750.0 million. The company had taken this step with an objective of enhancing value for its shareholders. We also hold confidence in management's track record of utilizing cash efficiently, adding value to the stock.

As international markets are gaining momentum, the fact that about two-thirds of Cameron’s total revenue comes from outside North America is likely to bode well in the near term.

Cameron looks quite sound footed with decent short-term momentum and a positive shift in estimates. In the past 30 days, the Zacks Consensus Estimate for the fourth quarter has moved up by a penny to 97 cents per share, with 2 estimates moving higher for Cameron against none going lower. For the full year also 1 estimate has gone up in the same time frame, pegging the Zacks Consensus Estimate at $3.26 per share. The stock has also started to move higher lately, adding 7.4% over the past four weeks.

However, with markets remaining competitive and pricing likely to be weak, we see no obvious catalysts in Cameron’s business to significantly push the stock price higher in the near-term and would rather wait for a better entry point before accumulating shares.

Stocks That Warrant a Look

We expect Cameron to perform in line with its peers and industry levels in the coming months. Meanwhile, one can consider better-ranked energy sector stocks like Harvest Natural Resources Inc. (HNR - Snapshot Report), Clayton Williams Energy, Inc. (CWEI - Snapshot Report) and Tesco Corporation (TESO - Snapshot Report) which currently sport a Zacks Rank #1 (Strong Buy).
 

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