Pride International, Inc.âs (PDE) first-quarter 2008 results came in better than expected, reflecting higher day-rates for its deepwater and mid-water rigs, partly offset by jack-up softness. Revenue and operating earnings from the companyâs deepwater fleet increased 19% and 35% from the previous quarter, respectively. In the companyâs mid-water fleet, sequential revenue and earnings gains were 12% and 7%, respectively.
Recent contract awards and extensions have helped the company achieve a record backlog of approximately $9.4 billion, providing for significant earnings visibility, going forward. Our earnings estimates and price objective go up, while our Buy recommendation remains unchanged. Despite its growing deepwater drilling exposure, Pride shares continue to trade more in-line with Gulf of Mexico (GoM) jack-up operators than with its deepwater peers.
The resulting discount at which the stock trades relative to deepwater operators makes valuation very compelling, in our view. Our new $48 price objective, raised from $42 before, is based on 2008 P/E and EV/EBITDA multiples of 12.7x and 7.5x, well within historical trading ranges. Pride's diversified portfolio of drilling assets, both in terms of rig class as well as areas of operation, provides it with a strong leverage to the current offshore drilling cycle. We expect demand for offshore drilling assets, particularly on the deepwater side, to remain robust in the foreseeable future.
Read the analyst note on PDE.
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