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Bull of the Day: RPC Inc. (RES)

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RPC Inc. (RES - Free Report) has put the tough times behind it as crude surges above $60 a barrel and drilling picks up. This Zacks Rank #1 (Strong Buy) is expected to see a 224% increase in earnings in 2017 thanks to the energy recovery.

RPC provides a range of specialized oilfield services and equipment to the independent and major oil and gas companies throughout the US, including a large exposure in the Permian.

It operates two segments: technical services and support services. Technical provides services directly to a customer's well, including pressure pumping, coiled tubing, hydraulic workover services, nitrogen, downhole tools and surface pressure control equipment.

Support services includes providing equipment for customer use or services to assist customer operations including rental of drill pipe and related tools, pipe handling, inspection and storage services.

A Strong Third Quarter

On Oct 25, RPC reported its third quarter results and met the Zacks Consensus Estimate of $0.28.

Revenue rose by 167.8% to $471 million from $175.9 million in the third quarter of 2016 thanks to higher activity levels and pricing for RPC services and continued activation of previously idled revenue-producing equipment.

For the 9 months through Sep 30, revenue jumped to $1.2 billion from $508 million in 2016.

The energy industry really turned around in 2017 as the average U.S. domestic rig count during the third quarter was 946, up 95.1% compared to the same period in 2016.

Those rig increases have moderated, however, but the company still expects strong customer activity through the remainder of 2017 and into the start of 2018.

One danger the company noted in the third quarter, was that it began to experience increased labor cost and raw material inflation. Will wage inflation really bite in 2018?

Estimates Soar for 2018

Analysts are bullish on the company heading into the fourth quarter earnings report which will be out on Jan 24.

Earnings are expected to rise 224% in 2017 to $0.82, up from a loss of $0.66 in 2016.

The good times are expected to last in 2018 as the Zacks Consensus Estimate has risen to $1.64 from $1.53 in the last month, with one analyst even raising his estimate in the last week.

That's earnings growth of 99.7%.

Rare Energy Company with No Debt

RPC has a spectacular track record of rewarding its shareholders.

Since 2006, it has returned $677 million to shareholders in the form of dividends and share repurchases.

It pays a dividend, currently yielding 1.1%.

As of the end of the third quarter, it had $136.9 million on its balance sheet and no debt.


Shares Have Rebounded But Valuations Still Cheap

The energy stocks are no longer the poor man of Wall Street as they staged a big rally in late 2017.

RPC shares jumped 16.8% in the last 6 months compared to 13.7% for the S&P 500 during the same period.

It trades with a forward P/E of just 15, which is cheap compared to the overall market.

Be sure to tune into the fourth quarter earnings report at the end of January for further guidance about 2018.

But if you're an investor looking for an energy play with little debt and strong earnings growth, RPC is one to keep on your short list.

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