KeyBanc Upgrades Willbros Group (WG) to Buy; Improving End Markets

November 6, 2009 7:33 AM EST

KeyBanc upgrades Willbros Group, Inc. (NYSE: WG) to Buy. Price target $21.

KeyBanc analyst says, "Following Willbros Group's 3Q09 conference call and our follow-up discussion with management, we are upgrading the stock to BUY on increasing signs that utilization rates in WG's core operations might be at a trough...Reducing Our 2009 and 2010 EPS Estimates on Lower Margins; Initiating 2011 Estimates – We are reducing our 2009 and 2010 EPS estimates, primarily reflecting lower margins on weaker near-term utilization levels than we previously anticipated, coupled with management's indication that the next couple of quarters will see additional charges related to cost-saving initiatives. We are lowering our 2009 estimate to $0.55 (from $0.87), which compares to management's revised guidance of $0.50-$0.60 (from $0.80-$1.10) and consensus of $0.84. Our revised 2009 estimate reflects a 4Q09 loss forecast of $0.25 per share, which compares to management's implied guidance of a $0.20-$0.30 loss and consensus EPS of $0.06. We are also lowering our 2010 EPS estimate to $0.63 (from $1.05; consensus $0.95), primarily reflecting ongoing margin pressures on lower utilization levels, for at least the 1H, and some cost savings-related charges in the 1Q – we are now assuming a 2010 operating margin of 3.4% (from 5.1%). Our 2010 revenue and bookings estimates remain relatively intact at $1.26 billion (from $1.25 billion; consensus $1.18 billion) and $1.60 billion (from $1.57 billion), respectively, as we expect choppy near-term bookings trends giving way to consistent growth in the 2H10 time frame. Our 2010 final backlog assumption also ticked up slightly to $883 million (from $857 million)...We are initiating our 2011 EPS estimate at $1.22 (consensus $1.11), predicated on revenue growth of 36% vs. our 2010 estimate to $1.7 billion (consensus $1.2 billion)..."

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