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On Feb 22, Zacks Investment Research upgraded Houston, Texas-based onshore contract driller Patterson-UTI Energy Inc. (PTEN) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Patterson-UTI had a good 2013, beating the Zacks Consensus Estimate in three out of four quarters, with the most recent quarter reporting a 27% positive surprise. Investors are also bullish on the company based on its dividend story and share repurchase program.

Detailed Analysis

On Feb 6, Patterson-UTI reported fourth earnings of 28 cents per share, much above the Zacks Consensus Estimate of 22 cents amid an increase in rig revenues. Reported revenues for the quarter surpassed both the Zacks Consensus Estimate as well the year-ago quarter level.

Additionally, Patterson-UTI approved a quarterly cash dividend of 10 cents per share, representing a sequential hike of 100.0%. The announcements had a positive impact on investors as the stock price shot up 13.4% to $27.87 on Feb 6.

The bullishness does not end there. The momentum carried the stock further up, over 9% since the reported earnings, to reach $30.40 on Feb 24. The intraday high of $30.67 also marked the new 52-week high for the company.

Patterson-UTI’s growing premium land rig fleet and the expected demand uptick for such services also works in its favor. The company’s new rigs and efficient equipment should give Patterson-UTI Energy an edge over competitors and help it weather the current volatile environment better than some of its peers.

We expect this growth to continue for Patterson-UTI. In the past 30 days, there have been 9 upward revisions in the current quarter estimates, increasing the consensus from 23 cents to 29 cents. The 11 upward estimate revisions for the current year has resulted in an increase in the consensus estimate from $1.12 per share to $1.32.  

Other Stocks to Consider

Some other stocks worth considering in the oil and gas drilling sector include Helmerich & Payne, Inc. (HP), New Source Energy Partners L.P. (NSLP) and Seadrill Partners LLC (SDLP). All these stocks sport a Zacks Rank #1 (Strong Buy).
 

 
HELMERICH&PAYNE (HP): Free Stock Analysis Report
 
NEW SOURCE EGY (NSLP): Free Stock Analysis Report
 
PATTERSON-UTI (PTEN): Free Stock Analysis Report
 
SEADRILL PTNRS (SDLP): Free Stock Analysis Report
 
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Zacks Investment Research