Cameron International (CAM)
By Michael Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 2/14/13 Sign up for free Cabot Wealth Advisory e-newsletter
One idea that popped up on my screens was an oil service stock that hadn’t gone anywhere for nearly two years, and recently reported so-so earnings and cut guidance for 2013. Not exactly a classic growth stock set-up! But the stock moved out to new highs, and after doing some digging I’ve concluded it has a long runway of growth.
It’s Cameron (CAM), and this is what I wrote about it two weeks ago in Cabot Top Ten Trader:
“Cameron is a good-sized player in the oil and gas equipment sector, with a specialty in sub-sea products that help drillers handle the flow of liquids. Business has been solid for some time, but the reason the stock is one of the strongest in the market is because of booming orders for its equipment ... especially for deepwater drilling-related equipment. Specifically, in the fourth quarter, sales and earnings beat expectations, although 2013 guidance was a bit light. But what investors focused on was the incredible bookings that Cameron recorded in the quarter; the firm landed a whopping $3.4 billion of new orders (including $2.5 billion of deepwater-related bookings), up from $1.9 billion of orders a year ago, which drove the company’s total backlog to a record $8.6 billion.
“When you combine those terrific order and backlog figures with the solid string of sales and earnings growth, still-elevated oil prices and what seems like ever-increasing demand for more deepwater equipment, it backs up the view that Cameron’s bottom line should grow 25% to 30% both this year and next. Throw in a reasonable valuation (16 times this year’s estimates) and a fresh breakout from a 23-month base (see below), and we think the stock has solid upside potential.”
As I mentioned, analysts see this year’s bottom line growing 24%, with earnings up another 30% next year, and with oil prices remaining elevated, I think those figures could prove conservative. The stock ramped to new highs on the report, and has since leveled out in the mid-60s. Ideally, it will dip a couple of points for a better entry, but barring a huge downturn in the market, I think CAM is a decent buy around here with a stop near 58.
In addition to Cameron, a ton of stocks are performing well now, telling me there are lots of opportunities for profit. And that’s where Cabot Top Ten Trader shines! For details, click here now.
|Cameron International (CAM)
1333 West Loop South, Suite 1700
Houston, Texas 77027
|Index Membership: N/A
Sector: Basic Materials
Industry: Oil & Gas Equipment & Services
Full Time Employees: N/A