Parker Drilling Company: PKD

It's not too late to find value in the energy services sector. Parker Drilling Company (PKD) continues to be a value stock even as shares hit new multi-year highs. This Zacks #1 Rank (strong buy) is now trading with a forward P/E of 14.2, up from 11.9 in mid-November.

Parker Drilling provides contract drilling solutions, rental tools and project management to the energy industry. It has 25 land rigs and 2 offshore barge rigs in its international fleet. Its U.S. fleet consists of 13 barge rigs in the Gulf of Mexico.

The company's rental tool segment supplies equipment to operators on land and offshore in the U.S. and some international markets.

Parker Surprised in Q3 by 38%

On Nov 3, Parker reported its third quarter results and surprised on the Zacks Consensus Estimate by 5 cents. Earnings per share were 18 cents compared with the consensus of just 13 cents. The company only broke even in the year ago quarter.

Revenue rose to $176.6 million from $172 million a year ago. The quarter was boosted, again, by big growth in the Rental Tools segment. Sales rose 30% to $62.4 million from $48.1 million a year ago.

Demand for drill pipe and related products, especially from operators drilling in the shale plays, continued to expand.

The level of international and deepwater Gulf of Mexico placements also increased in the quarter. U.S. Drilling revenue rose 94% to $28.9 million from $14.9 million a year ago.

For the quarter, Parker had an average of 10.7 barge rigs employed compared to about 7.6 barge rigs which were employed in the third quarter of 2010.

Zacks Consensus Estimates Rise

The estimate picture for Parker looks good. As you can see from the price and consensus chart below, estimates fell off a cliff, along with the stock price, during the Great Recession in 2008/2009.

But the earnings have turned it around and now the chart is very bullish, showing the 2012 consensus estimate again rising another 45% after an expected 550% earnings growth in 2011.

That is a huge turnaround from 2010 when the company made just 8 cents for the entire year.

The 2011 Zacks Consensus Estimate has risen to 52 cents from 46 cents in the last 60 days. Whereas the 2012 Zacks Consensus Estimate has also jumped to 75 cents from 69 cents.

Shares at 3-Year Highs

Since the summer sell-off shares have spiked to new 3-year highs which is why the stock is now more expensive, on a P/E basis, than it was just a few months ago when I last covered it.

But even with a P/E of 14.2, it is still considered a "value" stock as my cut-off is at 15x.

The company also has a price-to-book ratio of only 1.4. A P/B ratio under 3.0 is considered a value.

Parker Drilling is a way for investors to get into the hot energy play, especially in the shale, without actually owning one of the explorers themselves. Parker is scheduled to report fourth quarter results on Feb 22.