Nabors Industries, which provides land-drilling gear and services to oil and gas companies, has fattened up on increasing demand for its rigs. Earnings more than doubled last year as the company scored lucrative contracts for use of its equipment. But Nabors' stock, ever-sensitive to swings in energy prices, has suffered lately, sinking 19% since January. And worries of falling energy prices later this year aren't helping. That makes the shares, recently $67, look abnormally cheap, say analysts at investing newsletter Dow Theory Forecasts.
Dow Theory analysts don't recommend going overboard with energy stocks, but they do think oil prices should remain strong as long as demand grows steadily and energy producers struggle to increase reserves. They recommend focusing on "best-of-breed" energy companies that are well-positioned in their markets and whose stocks are still attractively priced. Nabors is their favorite drilling stock.
Nabors' size is an advantage. The largest land driller in the world, it owns nearly 600 land drilling rigs, plus 870 land-workover and well-servicing rigs and a fleet of offshore rigs. To take advantage of high demand, the company plans to roll out 100 additional rigs over the next couple of years and has already signed three-year contracts for 82 of them. The firm makes most of its money drilling in the U.S. and Canada, but it's also expanding its presence in such places as the Middle East and Africa.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Analysts, on average, expect earnings to grow 55% in 2006, to $6.21 per share, according to Thomson First Call. Yet the stock (symbol NBR) trades at just 11 times that earnings estimate.
Despite their ability to shoot the lights out when oil and gas prices are surging, energy-services stocks aren't for everyone -- share prices often collapse during lean times. For more information about Nabors and other service companies, see Big Energy's Enablers from the April issue of Kiplinger's Personal Finance.
-
Seven Surprising Reasons Retirees Are Going Back to WorkSure, money is a big reason to come out of retirement, but it's not the only reason retirees are doing it.
-
Dow Gains 617 Points as Rate Cuts Near: Stock Market TodayWednesday's economic data didn't shift Wall Street's expectations that the Fed is preparing for a rate cut at next week's meeting.
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have TodaySherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
If You'd Put $1,000 Into UnitedHealth Group Stock 20 Years Ago, Here's What You'd Have TodayUNH stock was a massive market beater for ages — until it wasn't.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for a Fall Interest Rate Cut by the FedA lot can happen between now and then, but the probability the Fed cuts interest rates in September is back above 80%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?
-
How the Stock Market Performed in the First 6 Months of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
If You'd Put $1,000 Into Berkshire Hathaway Stock 20 Years Ago, Here's What You'd Have TodayBerkshire Hathaway is a long-time market beater, but the easy money in BRK.B has already been made.
-
If You'd Put $1,000 Into Procter & Gamble Stock 20 Years Ago, Here's What You'd Have TodayProcter & Gamble stock is a dependable dividend grower, but a disappointing long-term holding.
