WFT daily and weekly charts. Weatherford reported earnings earlier in the week beating estimates on the bottom line and slightly missing on the top line. The stock rallied from $16.46 before earnings to closing at $16.95 on over 3x average volume following the earnings call. WFT held nicely throughout the rest of the week and now sits at $17.07. My main takeaways from the call: margins across all geographic segments are improving, the remediation of accounting issues is on track to be finalized by year end, the company plans on divesting non-core businesses over the next 12 months that account for $1.2B in revenue next year, and plans on paying down $3-5B in debt by the end of 2015. Included in the divestment program is a spinoff of the international land rig business in Q4 of 2014. Bernard Duroc-Danner (CEO) stated the company no longer needs rigs as an entry into performing other service work for clients. The conference call, similar to the Q2 call, had a focused tone, was well-organized, and management delivered specific answers to analyst questions. The company also named Krishna Shivram CFO, who has over 25 years in operational and financial experience previously at Schlumberger, and promoted Dharmesh Mehta to COO to replace the retiring Peter Fontana. In summary, Weatherford is slowly but surely gaining back the trust of investors. The stock continues to be cheap trading at 0.8x sales and 13.3x forward earnings. SLB trades at 2.7x sales and 16.0x forward earnings, HAL 1.6x and 13.1x, BHI 1.1x and 13.7x. The daily chart is strong. Chalkin money flow has been positive since mid August indicating strong accumulation. On balance volume is in an uptrend. RSI not yet extended at 66. Something to note on the weekly chart is the bottoming out of on balance volume and gradual turn higher.
NBL daily chart. I wrote about NBL on 8.10.2013 when the stock was at $64. This company offers great exposure to the Wattenberg Field in Colorado where they are drilling into the Niobrara and Codell formations. NBL also has significant exposure to the Marcellus shale. After “channel surfing” for several months NBL broke out a few weeks ago and after good earnings last week the stock’s last print is $76.51. It’s extended at this point outside the upper Bollinger Band and the RSI over 75. Volume on this breakout is very impressive, indicative of strength and that higher prices should be on the way. In any event, I’d wait for a pullback between $73 and $75 before taking a swing. The stock is reasonably cheap on a forward earnings basis at 18x and a PEG ratio of 1.5. Not a bargain, but not expensive. Market cap of $27.5B.
WLL daily chart. I wrote about WLL on 8.10.2013 when the stock was at $51. The stock has since been very strong trading along the upper Bollinger Band for the last two months. A strong earnings report last week has validated that move and elevated volume on this breakout is indicative higher prices should be on the way. Like Noble, I’d still wait on a pullback to the $66-67 level before pulling the trigger. One concerning thing is the RSI, it has made lower highs while the stock has gone from $65 to $69. Keep an eye on that. The spinning top candle on Friday (10/25) is a sign of indecision on where the market wants to take this stock in the near term. Whiting is a major player in the Bakken at a cheap valuation compared to peers, trading at 5.9x EV/EBITDA vs. Continental (CLR) at 11.5x. It also has exposure to the Niobrara. On the earnings call last week the company highlighted downspacing (decreasing the space between wells) in the Bakken and improved completion techniques. Market cap of $8.2 billion, Enterprise Value of 10.0 billion.
WFT daily chart. Weatherford continues to execute the fundamentals of a well-behaved stock. It isn’t erratic, doesn’t overheat the RSI, it stair-steps up, pulls back to the 20dma, rinse and repeat. I have written about this name a lot, and this post is simply an updated look at the chart. The company reports earnings on 11/4 after the close, and the conference call will follow the next morning. I plan on listening to the call and will post thoughts afterwards. I have positive feelings going into earnings for WFT due to how most other service companies have posted good quarters and traded to the upside.
NOV weekly chart. I wrote about NOV on 9.8.2013 when the stock had broken above $74 resistance trading at $78 and I thought it was headed to $85. After earnings last week the stock is at $82.72 about to challenge long term resistance at the $85 level. NOV traded up 4.5% on Friday (10/25) on 2x average volume. It created a beautiful hammer candle with good volume on the weekly as noted in the chart below. The company slightly beat expectations on the top and bottom line, but the real takeaway was margins inched up to 23.8% from 23.6% in Q2 indicating they had finally bottomed – I think that’s why the stock reacted the way it did on Friday. I talked about the margin issue in a post on 7.30.2013. The question is whether NOV has legs to take out $85…well looking at the solid volume and hammer candle it’s off to a good start. This week will be critical. If volume can continue to build and price stays roughly flat to higher, I’d say it has built enough cause for a break of $85. Pay close attention in the coming days.
RIG daily chart. I wrote about DO on 9.25.2013, similar story here for Transocean, the largest deepwater driller. The stock has been building a descending wedge for nearly all of 2013. At this point, money flow seems to be turning around looking at the CMF and Accumulation/Distribution line. The stock has been making lower lows yet the RSI has not…this tells me the sellers are becoming exhausted and the stock could be due for a rally. How much upside…I’m not sure…lots of technical baggage. First task would be to take out that 50 day moving average at ~$46. The company has a market cap of ~$16 billion. A little too much debt for my liking at $10.8 billion with $3.3 billion in cash. Book value is $43.51 and last trade is $45.18, immensely cheap from that standpoint. Earnings multiples of 9.9x trailing and 8.4x forward. Don’t forget the 5% dividend yield.
CXO daily chart. Concho has been very strong as of late. I wrote about it recently on 9.8.2013. After breaking above $100, the stock has visited my target price of $115, and could now face resistance at that level looking back to early 2012. The CMF is not particularly impressive as it’s pretty choppy. Accumulation/Distribution line is flattening out as well. The RSI is extended near 79. I’ve played blackjack a few times and if you’re lucky enough to be up a decent amount, it never hurts to take some chips, put them in your pocket and forget about them.
WFT daily chart. Weatherford continues to impress. I’ve written about it a lot so please see older posts for more commentary. Money flow into this name is strong as shown by the CMF and Accumulation/Distribution line. Recently the stock gapped down on news the CFO resigned (John Briscoe). This conjured up thoughts of the accounting issues that Weatherford is in the process of putting in the past. Briscoe was liked by Wall Street and credited with turning the accounting ship around at the company. We’ve yet to learn who the successor is. The stock recovered nicely and made short work of that gap. I continue to be bullish on WFT and think we could test $18 in the next few months and potentially the $20 level shortly thereafter.