We are maintaining our Hold rating on Weatherford International, Ltd. (WFT) shares following the company's quarterly results. Revenue was up more than 21% year-over-year on the back of solid gains in most of the geographic markets, particularly the Eastern Hemisphere.
We expect continued international strength and recovery in the Canadian market in the near- to medium-term. However, we believe that Weatherford's strong leverage to the current cycle and its growing international presence are adequately reflected in its premium valuation relative to the peer group.
Weatherford reported modestly weaker-than-expected fourth-quarter 2007 recurring earnings of $0.97 per diluted share (our estimate was $1 per diluted share), compared to $ 0.76 per diluted share in the year-earlier quarter and $0.85 per diluted share in the previous quarter. The year-over-year positive comparison was driven mainly by solid U.S. and international performance, along with increased rig activity. Fourth quarter total revenue was $2,191.8 million, up more than 21% year-over-year.
Weatherford shares command a valuation premium relative to its peers, based on most conventional metrics. The company's strong leverage to the current cycle and its growing international base of operations justify some of this premium, but leave little room for upside, in our view.
While we continue to like Baker Hughes (BHI) and Halliburton (HAL) among the majors, we also like National-Oilwell Varco (NOV) and W-H Energy (WHQ) in this space. We are keeping our 2008 EPS estimate unchanged at $4.40 and introducing our 2009 estimate at $5.44. Our six-month target price is $66.
Read the full analyst report on WFT.
Read the full analyst report on BHI.
Read the full analyst report on HAL.
Read the full analyst report on NOV.
Read the full analyst report on WHQ.
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