BJ Services Co.'s (BJS) fiscal third-quarter 2008 earnings, though below the year-ago level, managed to beat estimates on the back of revenue improvement in all the segments.
Importantly, the company appeared to have achieved price and margin stabilization in its core U.S. pressure pumping operations. However, it remains to be seen whether the trend can be sustained given the ongoing weakness in natural gas prices and the supply-demand imbalance in the pressure pumping market. Being a relatively commodity-type supplier, BJS remains particularly exposed to these headwinds.
Oilfield activity levels are particularly strong in North America, as evident from the increasing rig count level. The current U.S. rig count (the week of September 5, 2008) is up approximately 10% from the year-earlier level.
The overall average U.S. rig count last year was up 10% from the previous year s level. While some moderation activity levels is likely in the coming months in response to the current weak outlook for domestic natural gas prices, the overall rig count is expected to still compare favorably with historical levels.
BJ Services also remains well positioned internationally, with strong prospects for revenue growth and margin gains. Prospects are particularly favorable in the Middle-East and Latin America, where year-over-year revenue growth rates were 21% and 30%, respectively, in the recently completed fiscal third quarter of 2008.
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