What happened
Shares of Oceaneering International (OII 1.44%) jumped 10% out of the gate Thursday morning, after the maker of remotely operated vehicles (ROVs -- deep-sea submersible robots) received its third buy rating in a month from a Wall Street firm.
Last month, Merrill Lynch and Wolfe Research initiated coverage of Oceaneering stock with buy-equivalent ratings and price targets of $17 and $18, respectively. (Oceaneering stock is selling for $14.59 per share as of 10:30 a.m., off its earlier high but still up 8.3%).
Today, it's Evercore ISI jumping on board with an upgrade from "in line" to "outperform."
Image source: Getty Images.
So what
No one seems to have details on what precisely prompted Evercore to upgrade Oceaneering this morning, but last month's upgrades may hold a clue or two.
On November 12, TheFly.com reported that Merrill Lynch was enthusiastic that after a long period of decline, "floating [oil] rig demand" in the energy sector would grow in the "high single-digits" in 2020. Because Oceaneering's ROVs are used to monitor the underwater health of such rigs and the wells they drill, such a return to growth for Oceaneering's customers would likely benefit Oceaneering itself.
About a week later, Wolfe Research chimed in with a note agreeing that offshore drilling is poised to grow and calling ROVs a "defensible niche" for Oceaneering.
Now what
For a company that's missed its earnings estimates (badly) twice in a row in the last two quarters, where sales and earnings are both trending negative and the stock is down 12% over the past year, this is all good news -- if the upgrades are justified.
Meanwhile, most analysts who follow Oceaneering International stock are still predicting a money-losing end to 2019 -- and another loss in 2020. For today's stock price gains to hold, those predictions are going to have to get debunked, and the sooner the better.
