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Should Diamond Offshore (DO) Stock Be in Your Portfolio?
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We issued an updated research report on Diamond Offshore Drilling Inc. (DO - Free Report) on Feb 8, 2017. The leading offshore contract driller reported better-than-expected fourth-quarter 2016 results. However, the stock underperformed the Zacks categorized Oil & Gas Drilling industry in the last three months.
Currently, the company carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Diamond Offshore is a leading offshore contract driller with services all around the world. The company’s working fleet is much younger than that of most other drilling players. Furthermore, 94% of the rig days for the company’s ultra-deepwater units are being booked by top-tier global customers for 2017. This is likely to result in steady cashflows for the company.
As of Dec 31, 2016, Diamond Offshore had a backlog was $3.6 billion. This not only reflects steady demand from customers but also offers an unmatched level of earnings and cash flow visibility. This enables Diamond Offshore to navigate the current uncertain environment better than many of its peers.
Recently, the company reported fourth-quarter 2016 adjusted earnings of 53 cents per share that comfortably surpassed the Zacks Consensus Estimate of 12 cents. Initiatives for cost control, along with improving efficiencies for rigs, resulted in the better-than-expected earnings.
The bottom line, however, decreased from the year-earlier earnings of 89 cents per share due to considerably low contributions from jackups.
Moreover, Diamond Offshore shares displayed significant pricing weaknesses in the last three months. During the aforesaid period, the company’s shared gained 0.5% compared with 27% increase for the Zacks categorized Oil & Gas Drilling industry.
Additionally, the company is overvalued with its Price to Free Cash Flow ratio trending higher than the industry over the past three months. Presently, the Price to Free Cash Flow ratio of Diamond Offshore is 25.04, which is significantly above 6.56 for the broader industry.
Stocks to Consider
Some better-ranked players in the energy sector include Imperial Oil Limited (IMO - Free Report) , Northern Oil and Gas Inc. (NOG - Free Report) and Denbury Resources Inc. . Both Imperial Oil and Denbury Resources sport a Zacks Rank #1 (Strong Buy), while Northern Oil and Gas carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
In 2017, Imperial Oil’s earnings are anticipated to grow 386.6%.
Northern Oil and Gas posted an average earnings surprise of 81.35% in the last four quarters.
Denbury surpassed the Zacks Consensus Estimate in each of the last four quarters with an average earnings surprise of 283.33%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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Should Diamond Offshore (DO) Stock Be in Your Portfolio?
We issued an updated research report on Diamond Offshore Drilling Inc. (DO - Free Report) on Feb 8, 2017. The leading offshore contract driller reported better-than-expected fourth-quarter 2016 results. However, the stock underperformed the Zacks categorized Oil & Gas Drilling industry in the last three months.
Currently, the company carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Diamond Offshore is a leading offshore contract driller with services all around the world. The company’s working fleet is much younger than that of most other drilling players. Furthermore, 94% of the rig days for the company’s ultra-deepwater units are being booked by top-tier global customers for 2017. This is likely to result in steady cashflows for the company.
As of Dec 31, 2016, Diamond Offshore had a backlog was $3.6 billion. This not only reflects steady demand from customers but also offers an unmatched level of earnings and cash flow visibility. This enables Diamond Offshore to navigate the current uncertain environment better than many of its peers.
Recently, the company reported fourth-quarter 2016 adjusted earnings of 53 cents per share that comfortably surpassed the Zacks Consensus Estimate of 12 cents. Initiatives for cost control, along with improving efficiencies for rigs, resulted in the better-than-expected earnings.
The bottom line, however, decreased from the year-earlier earnings of 89 cents per share due to considerably low contributions from jackups.
Moreover, Diamond Offshore shares displayed significant pricing weaknesses in the last three months. During the aforesaid period, the company’s shared gained 0.5% compared with 27% increase for the Zacks categorized Oil & Gas Drilling industry.
Additionally, the company is overvalued with its Price to Free Cash Flow ratio trending higher than the industry over the past three months. Presently, the Price to Free Cash Flow ratio of Diamond Offshore is 25.04, which is significantly above 6.56 for the broader industry.
Stocks to Consider
Some better-ranked players in the energy sector include Imperial Oil Limited (IMO - Free Report) , Northern Oil and Gas Inc. (NOG - Free Report) and Denbury Resources Inc. . Both Imperial Oil and Denbury Resources sport a Zacks Rank #1 (Strong Buy), while Northern Oil and Gas carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
In 2017, Imperial Oil’s earnings are anticipated to grow 386.6%.
Northern Oil and Gas posted an average earnings surprise of 81.35% in the last four quarters.
Denbury surpassed the Zacks Consensus Estimate in each of the last four quarters with an average earnings surprise of 283.33%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>