Evercore ISI Reiterates Buy on Parker Drilling (PKD) After Meeting with Management
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Evercore ISI reiterated a Buy rating and $3.50 price target on Parker Drilling (NYSE: PKD) after hosting company management for investment meetings. CEO Gary Rich’s message centered around his team’s focus on ROC and cash flow, implicitly suggesting the stock deserves a rerating, as the team looks to transition PKD’s business model to one that actually creates value for shareholders instead of just another OFS momentum stock.
Analyst James West commented, "We had the pleasure of hosting PKD's Chairman, President and CEO, Gary Rich, and VP of IR and Corporate Development, Jason Geach, for investor meetings in NYC and Boston last week. Overall, the company's focus remains on managing through the trough: preserving cash, limiting costs and capex, and effectively managing working capital while maintaining an eye for the eventual upturn and the long-term capabilities of its asset base. Since the 2Q conference call in early August, the quarter is playing out largely in line with the company's expectations and management remains skeptical that the recent rebound in WTI will drive a material improvement in results through the remainder of the year. Following the meetings we came away slightly more pessimistic on pricing power in the short-term (next 18 months) for U.S. Rental tools given the current oversupply, but our thesis remains largely unchanged: PKD’s current equity value underestimates the company’s future FCF potential and accompanying returns as liquidity and margins remain relatively strong, the company has no maturities until 2020, and management continues to execute very well through the downturn, gaining share in key businesses and stringently cutting costs. We reiterate our Buy rating and $3.50 PT based on our SOTP analysis."
Shares of Parker Drilling closed at $2.13 yesterday.
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