Analysts Offer Insights on Materials Companies: Nabors Industries (NYSE: NBR), Conocophillips (NYSE: COP) and Energen Corp. (NYSE: EGN)

By Ryan Adsit

There’s a lot to be optimistic about in the Materials sector as 3 analysts just weighed in on Nabors Industries (NYSE: NBR), Conocophillips (NYSE: COP) and Energen Corp. (NYSE: EGN) with bullish sentiments.

Nabors Industries (NYSE: NBR)

In a report released today, Sean Meakim from J.P. Morgan reiterated a Buy rating on Nabors Industries (NYSE: NBR), with a price target of $14. The company’s shares opened today at $12.48, close to its 52-week high of $13.62.

Meakim said:

“We left Nabors’ Analyst Day incrementally constructive on the driller’s potential to drive above peer EBITDA growth in the coming cycle, particularly one that we expect to include a W-shaped recovery for U.S. onshore. The company’s suite of integrated (and increasingly automated) services and uniquely diversified geographic footprint screen well in our investment framework of scale, flexibility and differentiation. Given our cycle view, the 2020 earnings targets feel like reach goals ($1.6bn EBITDA v ~$1.4bn in 2014 ex. C&P) but the 2018 seems more manageable ($1.1bn v. JPMe $1.05bn). Nabors’ cost cutting efforts have been impressive, with G&A 42% below 4Q14 levels and a cumulative $477mm expected to be realized by the end of 2017 (v. 4Q14’s $445mm run rate). We have growing confidence directionally in the state of NBR’s balance sheet in coming years (target 2018 leverage ~3x or less). Shares of NBR remain dramatically the cheapest in our land drilling coverage on our 2018e (6.5x EV/EBITDA v. peers 8.5x), which we owe to 1) investor over-exuberance regarding a U.S. recovery, 2) underappreciation for the durability and green shoots of NBR’s core international markets and 3) sticky (mis)perceptions of relative leverage risk. With updated estimates to better capture the timing and pace of international tenders, the value of the new Saudi JV and incremental NDS adoption, we raise our price target to $14. NBR remains our lone onshore drilling Overweight.”

According to TipRanks.com, Meakim is a 4-star analyst with an average return of 4.3% and a 51.0% success rate. Meakim covers the Basic Materials sector, focusing on stocks such as Diamond Offshore Drilling, Oceaneering International, and Frank’s International.

Currently, the analyst consensus on Nabors Industries is Moderate Buy and the average price target is $13.25, representing a 6.2% upside.

In a report issued on October 28, UBS also reiterated a Buy rating on the stock with a $17 price target.
Conocophillips (NYSE: COP)

In a report released yesterday, Phil Gresh from J.P. Morgan reiterated a Buy rating on Conocophillips (NYSE: COP), with a price target of $52. The company’s shares opened today at $44.31.

Gresh wrote:

“We thought that COP delivered a well-balanced message at today’s analyst day around portfolio management, debt reduction and return of capital. We were encouraged to hear a more aggressive portfolio approach, with accelerated asset sales ($5-8B) and proceeds/excess cash reasonably balanced between debt reduction ($7B) and buybacks ($3B) at ~$50/bbl. This message is very consistent with our thesis around both a “per share” focus to growth (low single digit absolute production growth, with a buyback kicker) and achieving top tier return of capital (1.8x the 2.5% dividend yield = ~4.5% annualized return of capital). The pushback on COP remains (1) the debt burden, with post asset sale leverage at ~3x @ $50/bbl and ~2x @ $60/bbl, which isn’t unreasonable, but may be tough for “A” rating, and (2) the timing to achieve this debt reduction, given the 2019 goal. As we noted in our preview, a meeting’s worth of promises still requires execution. We think that the message was clear and achievable, with upside if oil is >$50 and a commitment to debt reduction <$50, which seems reasonable."

According to TipRanks.com, Gresh is a 4-star analyst with an average return of 5.7% and a 68.4% success rate. Gresh covers the Basic Materials sector, focusing on stocks such as Imperial Oil Limited, Occidental Petroleum, and Cenovus Energy Inc.

Currently, the analyst consensus on Conocophillips is Moderate Buy and the average price target is $53.67, representing a 21.1% upside.

In a report issued on November 7, Edward Jones also upgraded the stock to Buy.
Energen Corp. (NYSE: EGN)

In a report released yesterday, Michael Glick from J.P. Morgan reiterated a Buy rating on Energen Corp. (NYSE: EGN), with a price target of $64. The company’s shares opened today at $55.21, close to its 52-week high of $61.98.

According to TipRanks.com, Glick is a 5-star analyst with an average return of 25.2% and a 79.5% success rate. Glick covers the Basic Materials sector, focusing on stocks such as Whiting Petroleum Corp., Gulfport Energy Corp., and Oasis Petroleum Inc.

Currently, the analyst consensus on Energen Corp. is Strong Buy and the average price target is $63.83, representing a 15.6% upside.

In a report issued on November 3, Canaccord Genuity also reiterated a Buy rating on the stock with a $66 price target.