Precision Drilling Corp. - Momentum

Precision Drilling Corp. (PDS) recently hit a new multi-year high at $9.85 after reporting an impressive Q3 earnings surprise of 122% in late October. Estimates have since jumped higher, with the next-year estimate now projecting 71% earnings growth, providing plenty of momentum for this Zacks #1 rank stock.

Company Description

Precision Drilling Corp., through its subsidiaries, provides onshore drilling and well services to the oil and gas industry in Canada and the United States. The company was founded in 1951 and has a market cap of $2.67 billion.

With energy prices once again trending higher on the global economic rebound, energy service providers have seen demand for their services tick higher. That trend showed up in late October when Precision Drilling reported strong Q3 results that handily beat expectations.

Third-Quarter Results

Revenue for the period was up 42% from last year to $359 million. Earnings also came in strong at 20 cents, 122% ahead of the Zacks Consensus Estimate, where the company has surprised to the upside three of the last four quarters.

The strong quarter was driven by a sharp increase in the company's rig count, up 76% from last year on the previously mentioned surge in demand. Total working rigs now stands at 176, up from 106 last year and 130 just last quarter.

Persistently low natural gas prices remain a bit of a wildcard, with the company saying that its drilling rigs could be redirected towards oil and natural gas liquids to make up for nascent demand.

Strong Balance Sheet

The company also has a strong financial profile, with a cash balance of $209 million and a total debt load of $658 million. Its long-term debt-to-capital ratio of 21% is well below the industry average of 93%.

Estimates

We saw some pretty solid movement in estimates off the good quarter, with the current year adding 11 cents to 42 cents. The next-year estimate is up 6 cents in the same period to 72, cents, a bullish 71% growth projection.

Valuation

But in spite of the gains, the valuation picture still looks reasonable, with a forward P/E of 23X against the industry average of 22X.

6-Month Chart

On the chart, PDS has been rallying with the market since early September, recently hitting a new multi-year high at $9.85. Look for support from the trend line on any weakness, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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