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LONDON -- Shares in AMEC (LSE: AMEC  ) have taken a mild pasting recently after recent full-year results cautioned of "low-to-mid single digit" underlying revenue growth during the current year.

Despite this warning -- underlying revenues rose 21% last year in comparison -- I expect rising oil and gas demand to keep long-term earnings growth ticking along nicely. Broker Investec has attached a 12-month price target of 1,300 pence for AMEC's stock, carrying 26% upside potential from current levels.

Further growth expected in 2013
The energy services and engineering firm stated in its results that its oil and gas division should deliver another strong performance in 2013 -- revenue here rose 27% in 2012 -- while demand within the firm's clean energy, environment, and infrastructure markets should also remain perky.

Although demand from AMEC's oil sands and mining customers is expected to remain weak in the short term, this should be more than offset by growth in other areas. As such, I expect 2013 to result in solid, if not spectacular, growth for AMEC. I believe that a satisfactory order book of 3.6 billion pounds as of the end of last year helps to underpin the company's revenue forecasts.

I also have confidence that margins -- which fell to 8% last year from 9.2% in 2011 -- should begin to recover this year after extra procurement activity for some of the group's largest customers limited progress last year.

Exciting earnings growth on the horizon
City brokers anticipate earnings-per-share growth to continue its relentless march higher in coming years. A forecast rise of 11% to 91 pence this year is expected to be followed by an additional 12% leap to 102 pence in 2014.

This meaty earnings rise is likely to push AMEC's earnings multiple down to 11.5 and 10.2, respectively, for this year and next. The company's decent value is underlined by an attractive P/E-to-growth ratio, which is forecast at one and 0.9, respectively, for 2013 and 2014.

Drill for decent dividends
In my opinion, AMEC's progressive dividend policy represents an excellent payout potential for income investors. The board recommended a 20% dividend hike to 36.5 pence per share for 2012 following the company's strong cash-generation and future growth potential.

Analysts predict a yield of 3.4% for 2013 to rise to 3.9% during the following 12-month period. And projected dividend cover of 2.4 for both years provides weighty assurance that these targets will be met.

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11/13/2014 12:11 PM
AMEC $1055.42 Down -2.58 +0.00%
Amec CAPS Rating: No stars