Simmons Raises Price Target as Diamond Offshore Drilling (DO) Exceeds 1Q Expectations
Simmons maintained a Neutral rating on Diamond Offshore Drilling (NYSE: DO), and raised the price target to $19.25 (from $19.00), following the company's 1Q earnings report. DO reported Q1 EPS of $0.64 beat the Street's estimates of $0.27. Lower tax rate contributed $0.12 of the variance, and a sizeable revenue beat was the result of a $40M demobilization payment for the Ocean Endeavor's departure from the Black Sea.
Analyst Ian Macpherson commented, "Q1 results materially exceeded expectations due to a one-off $40M demobilization payment, but recurring results were in line and our forward estimate revisions at this time are minimal. Outlook remains demonstrably challenged (DO calling for oil price stability above $60/bbl to drive a meaningful recovery in demand and deepwater rig utilization), and DO continues to accentuate its relative balance sheet and backlog advantages as key differentiating buffers between here and there. We agree that these are valid and flattering criteria for DO, and while we do not find offshore driller stocks generally to be attractively valued relative to their funda, DO should trade more defensively than peers in the event of an OSX correction (and vice versa)."
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Shares of Diamond Offshore closed at $24.54 yesterday.