A Citi Investment Research analyst initiated coverage of oil services and equipment companies Monday, saying that the industry's upturn is far from over.
"Our positive stance on the oil services stocks is based on our view that we continue to have a mismatch between early- to mid-cycle market conditions and peak-cycle stock valuations," analyst Robin Shoemaker said in a note to clients.
The new outlook comes at a time of record prices for crude oil and other energy products. On Monday, prices for light, sweet crude passed the $143 per barrel mark on the New York Mercantile Exchange for the first time.
Higher oil prices are good for oil services and equipment providers because they encourage energy companies to spend more on extracting hydrocarbons in hard-to reach sites deep underground or out at sea.
"We believe that the industry upturn is still in its early-to-middle stages," Shoemaker said.
Shoemaker put "Buy" ratings on Schlumberger Ltd., Halliburton Co., Cameron International Corp. and National Oilwell Varco Inc., saying they "are likely to achieve above-average earnings growth through innovative technologies, focused acquisition strategies, and targeted expansions into new geographic markets.
Shoemaker rates BJ Services Co., Smith International Inc., Baker Hughes Inc. and Weatherford International Ltd. at "Hold."
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