Wells Fargo Upgrades Diamond Offshore (DO) to Outperform; Dividend Increase Possible As DO Seems Unlikely To Build More

Wells Fargo upgraded Diamond Offshore (NYSE: DO) to Outperform. Valuation range $80-82.

Wells analyst says, "We think DO's current valuation is attractive at a 10% NAV discount to peers, especially with a 5%+ dividend yield that we think could be increased. We estimate each of DO's three under-construction UDW drillships should add $0.40-$0.60/share annual earnings once delivered in 2013 and 2014."

"Due to the downtime associated with the mobilization of this rig, we are reducing our 2011 EBITDA/EPS estimates to $1,677MM/$6.76 from $1,699MM/$6.88. We are also trimming our 2012E EBITDA/EPS to $1,499MM/$5.56 from $1,516MM/$5.66, mostly to incorporate a lower rate ($280K) for the Ocean Rover than we had previously modeled."

For more ratings news on Diamond Offshore click here and for the rating history of Diamond Offshore click here.

Shares of Diamond Offshore closed at $68.02 yesterday.

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