General Electric And The Power Of Pessimism

It's been about two years since I last wrote on General Electric (NYSE:GE) and if I had to sum up the performance in that time it would be "blech". With the shares up only about 6%, General Electric has been dusted by Siemens (OTCPK:SIEGY), Illinois Tool Works (NYSE:ITW), 3M (NYSE:MMM), and Honeywell (NYSE:HON). Even Eaton (NYSE:ETN) and Dover (NYSE:DOV), which have had plenty of challenges from weak secular end-market cycles, have managed better performance over that stretch.

I believe there are multiple valid criticisms and concerns regarding GE. The accounting is messy, the adjusted free cash flow generation is quite weak, management accountability seems iffy, and it is hard to trust the strategic vision of a company that has demonstrated an uncanny knack for buying in at the top. The question I have is how well these issues are reflected in the share price and what could move the stock higher. I think the Street has "CEO fatigue" and news of a firm succession plan could provide a pop. I also think GE is poised to benefit from a recovering oil/gas market and reasonable medium-term outlooks for aviation and power generation. I'm not so sold on the company's digital strategy, but I can view that more as a "call option" at this point.

Below $30, I'm tempted. I can't be too comfortable with a situation where I don't really trust management and have concerns about the business mix (to say nothing of its intrinsic cash flow generation capabilities). Even so, I think GE could start to redeem its lost decade and may be worth a look for patient investors.

Read more here:
General Electric And The Power Of Pessimism

Seeking Alpha: Weatherford Slowly Changing The Tone

To be clear from the outset, Weatherford (NYSE:WFT) has given investors ample reason over the years to hate the management and have nothing to do with the stock. It's likewise entirely fair to say that a leader who presided over the making of an epic mess is rarely the person to lead the company out of it.

That said, I believe there is more than a little stubbornness out there regarding Weatherford and I believe that ignoring the cost and management improvements made by the company is a mistake. The current state of the North American onshore market is lousy, but I had already expected that, and I still believe that Weatherford shares ought to trade closer to the mid-teens. There is most definitely a real risk that the onshore market(s) stay weaker for longer, but I likewise believe there is an opportunity for a new and improved Weatherford to emerge as a viable new Top Three player in a market that wants one.

For the full article, follow the link:
Weatherford Slowly Changing The Tone

Seeking Alpha: Superior Energy Searches For Opportunity Amid Adversity

There is still no clear sign that the U.S. onshore energy market has bottomed, nor that global energy prices are likely to head meaningfully higher quickly. With abundant overcapacity across multiple service areas, Superior Energy (NYSE:SPN) is looking at a long, hard, and painful slog through this weak part of the cycle.

The good news is that the bad times won't last forever - at a minimum, there are too many over-leveraged service providers accepting almost any price to keep the lights on and their business models aren't viable on a long-term basis. Superior Energy has no such concerns for the foreseeable future and has instead been pursuing a strategy of preserving key customer relationships and assets while searching for M&A opportunities that could leave it as a more viable back-up choice when the Big Three become the Big Two after the Halliburton (NYSE:HAL) - Baker Hughes (NYSE:BHI) merger.

Sell-side analysts have made multiple cuts to their estimates for Superior as 2015 has gone on and I wouldn't be surprised if there are further cuts still to be made. At a more fundamental level, though, I believe these shares offer some solid long-term upside. A range of methodologies (cash flow, EV/EBITDA, and ROE/BV) supports a fair value range of $22.50 to over $30, all of which suggest upside for investors willing to hold through what will almost certainly be a few more rough quarters if not a protracted recovery period.

Continue here:
Superior Energy Searches For Opportunity Amid Adversity

Seeking Alpha: Weatherford Fixing Its Credibility Gap, But Now Market Conditions Weigh Heavily

Things were going pretty well for Weatherford (NYSE:WFT) six months ago. Management was making real progress with its efforts to streamline the business and reduce costs and talk of substantial free cash flow generation was just what Wall Street wanted to hear.

And then it all went south. Management communication issues over its free cash flow guidance brought back bad memories for a lot of investors and the steep fall in oil prices has gutted E&P budgets for 2015 and expectations for earnings in the oil services sector.

I continue to believe that Weatherford is a legitimate self-improvement story. While the sharp decline in oil prices will lengthen the timeline to meaningful cash flow, management has continued to make good decisions with respect to the company's cost base and business mix.

Please read the full article here:
Weatherford Fixing Its Credibility Gap, But Now Market Conditions Weigh Heavily

Seeking Alpha: Has All The Bad News Been Baked Into RPC's Price?

Superior quality can help a company through hard times, and energy services provider RPC (NYSE:RES) has held up better than companies like Basic Energy (NYSE:BAS), Key Energy (NYSE:KEG), and C&J Energy Services (NYSE:CJES), but a 40% drop in six months is still harsh. What's more, I think it's anybody's guess as to whether estimates have gone low enough to accurately reflect this downturn in the cycle - even RPC's management doesn't believe it has much visibility as to the depth or duration of the downturn.

I expect that RPC will emerge from this downturn in good condition and maintain its reputation as one of the highest-quality small cap service providers. While RPC shares should do better if/when the market believes it has overcorrected (and/or if the company's Permian-centric pressure pumping business holds up better than expected), but I don't expect RPC to offer the same sort of leverage to improving sentiment as Basic Energy or Key Energy would. On the other hand, I am confident in RPC's ability to withstand a prolonged downturn while its more debt-laden peers may not.

Continue here for the full article:
Has All The Bad News Been Baked Into RPC's Price?

Seeking Alpha: Sluggish European Demand May Be Opening A Window Into Innospec

I've liked specialty chemical company Innospec (NASDAQ:IOSP) as an operating entity for some time, but I've been less excited about the stock given its valuation. The shares are now down more than 20% from my initial write up and down a similar amount since my last write up, though, and that makes the risk-reward balance more interesting. While I do have some concerns that demand in Europe for the company's fuel additives will weaken further, I like the long-term outlook for the company's oilfield chemical and personal care performance chemical operations.

Click the link to continue:
Sluggish European Demand May Be Opening A Window Into Innospec

The Motley Fool: Weatherford International Rebuilding Trust, but Needs to Rebuild the Business

For a company with a long and unfortunate history of disappointing its shareholders, Weatherford International has come back strong on the back of a comprehensive turnaround and restructuring plan that is seeing the company sell or spin off lower margin and less competitive businesses. Weatherford is by no means finished with this process and still needs to prove that it can maintain its leadership in areas like tubular running, cementation, and artificial lift as well as improve operations like pressure pumping. Even so, and despite a good run over the past year, these shares still hold some appealing upside.

Continue reading here:
Weatherford International Rebuilding Trust, but Needs to Rebuild the Business

Seeking Alpha: Dover Still Excellent, But Not Currently A Bargain

If you love drilling into the minutiae of what industrial companies do, Dover (DOV) can be a bonanza. With nearly 30 major operating businesses, Dover is not particularly easy to benchmark. Luckily, the company's consistent earnings quality, strong margins, and good returns on capital make up for some of the difficulties in really drilling down into the details. Dover is looking at some good opportunities in areas like refrigeration, fluid control, and energy, but the shares already reflect a pretty high level of Wall Street affection. Though Dover isn't the most expensive quality industrial out there, I'd likely wait for a better discount to fair value before jumping in with my own money.

Follow this link to the full article:
Dover Still Excellent, But Not Currently A Bargain

The Motley Fool: The Clouds Are Parting for Weatherford International

The first-quarter earnings report for the fourth-largest energy services provider, Weatherford International (NYSE: WFT  ) , was not flawless in terms of growth or margins. What was, and is, more important is that the company has very clearly put itself on a path of serious self-improvement and is remaking itself into a high-margin provider of services with relatively little overlap with the big three -- Schlumberger (NYSE: SLB  ) , Halliburton (NYSE: HAL  ) , and Baker Hughes (NYSE: BHI  ) .

With this progress, the penalty to Weatherford's earnings before interest, taxes, depreciation, and amortization multiple no longer seems as appropriate, and these shares continue to look undervalued as an improving play on unconventional reservoirs.

Follow this link for more:
The Clouds Are Parting for Weatherford International

Seeking Alpha: RPC's Winter Of Discontent Has Passed

When I wrote on RPC (RES) about six months ago, I thought the company was a well-run, quality small-cap energy services name, but also a little pricey relative to some other options in the services space. RPC's performance in the interim was quite good (up about 20%), but the relative performances of Basic Energy (BAS) (up almost 120%) and several other service companies were even better, so I'm not exactly regretting the call.

Service stocks have rebounded on the prospects of greater activity in 2014, particularly in areas like pressure pumping and coiled tubing. Given that RPC maintained pretty good margins even as contracts rolled off and the company was forced to the tough spot market, I like this company's prospects for making hay as increased activity leads to better prices. The valuation isn't dirt-cheap right now, but I still think these shares can head higher in 2014.

Read the full article here:
RPC's Winter Of Discontent Has Passed

Seeking Alpha: Still Waiting For A Better Entry Point On Innospec

When you find a chemicals company that can routinely post double-digit returns on assets and invested capital, it's worth paying attention. Likewise, not many $1 billion companies can get meaningful share in markets when competing against behemoths like the chemical operations of Exxon Mobil (XOM) and Chevron (CVX), or Berkshire Hathaway's (BRK.A) Lubrizol. Now, with Innospec (IOSP) making it clear that growing its oilfield chemicals business is a priority, I'd say the story is getting better.

Valuation still remains an issue. I've liked Innospec as a company for quite some time, but as I observed about six months ago, the valuation was and is fairly demanding. The stock hasn't done much in the interim, and I'm likewise concerned that investors buying today may be facing a wait as the company "grows into" its valuation and as the market expects more moves to build the oilfield operations.

Read the full article here:
Still Waiting For A Better Entry Point On Innospec

The Motley Fool: Stormy Weatherford International Ltd Moving in the Right Direction

If you own shares of Weatherford (NYSE: WFT  ) , there have likely been many occasions that left you scratching your head and wondering, "what possessed me to do that?" To management's credit, though, it is no longer pursuing a strategy of bigger-must-be-better and is instead examining where the company's core competencies and profit opportunities really lie.

The second half of 2013 was volatile and largely disappointing as the company missed margin and cash flow generation guidance. This next year is likely to be challenging as well, as the company looks to enact a large headcount reduction as well as the sale/spinoff of multiple non-core businesses. Weatherford's many self-inflicted wounds have obscured that it does in fact do many things well, and investors looking to play a still-undervalued turnaround story in oil services may want to check this one out.

Read more here:
Stormy Weatherford International Ltd Moving in the Right Direction

Investopedia: Weatherford Burning Through Its Benefits Of The Doubt

Broadly speaking, there are two valid reasons to own Weatherford (NYSE:WFT). First, you believe that the company's position in markets like artificial lift, casing, and tool rental coupled with more disciplined management will lead to solid revenue and profit growth. Second, you believe that the company's process of getting its act together, including resolving tax/reporting issues, a FCPA investigation, and working capital management, will lift the penalty discount on the shares and/or prompt a buyout.

Judging by Weatherford's second quarter earnings, and the market's reaction, it seems like the second notion is in the lead. This wasn't a great quarter for the service sector, but Weatherford's quarter was pretty poor on an operating basis, and there's only just so much grace period that investors will give this management team. While I'm still content to own these shares on the basis of what I think is the underlying value to the business, the company needs to get its act together quickly.

Continue reading here:
http://www.investopedia.com/stock-analysis/080113/weatherford-burning-through-its-benefits-doubt-wft-slb-hal-bhi-dov.aspx

Investopedia: Expectations, Not Operations, Weighing On Halliburton

Going into this quarter, I had wondered whether expectations for Halliburton (NYSE:HAL) were running a little hot and whether that might set the company and stock up for a tough post-quarter reaction. I don't know whether it was the lack of major upside to second quarter numbers or management's comments that the pace of oil spill settlements has slowed, but the shares were a little soft in early trading Monday morning. Although Halliburton is not really my favorite company in the energy service space, it's hard for me to ignore the value and I believe this remains a good candidate for investors looking to play the rebound in North America and the future growth in offshore and international unconventional development.

Please read more at Investopedia:
http://www.investopedia.com/stock-analysis/072213/expectations-not-operations-weighing-halliburton-hal-bhi-slb-clb.aspx

Investopedia: Schlumberger Leads The Way, Like It Usually Does

There are lively debates to be had about whether it's better to own the leaders or laggards as a sector bottoms, the idea being that the laggards have more to gain when conditions improve. Schlumberger (NYSE:SLB) is definitely no laggard, as the company once again delivered a set of results that confirms its leadership in multiple sectors and geographies in the energy services space. With Schlumberger doing well in North America, well-positioned in offshore/deepwater with its OneSubsea venture with Cameron (NYSE:CAM), and only beginning to take advantage of what China may have to offer, Schlumberger continues to look like a worthwhile idea in the energy space.

Please go to Investopedia for the full article:
http://www.investopedia.com/stock-analysis/072213/schlumberger-leads-way-it-usually-does-slb-hal-cam-bhi-atony.aspx

Investopedia: Baker Hughes Still Playing Third Fiddle

You don't have to the biggest or the best to succeed in energy services, but you do have to execute on the opportunities in front of you. On that score, Baker Hughes (NYSE:BHI) still has work to do. Although the company is making some progress with its North American pressure pumping business and the Mideast continues to be a solid source of growth, there is still the risk of a one-two punch from softer margins and less E&P spending than expected. Baker Hughes is still undervalued today and arguably has more upside from better management execution, but it's tough to work up a lot of enthusiasm for the stock.

Please follow this link for more:
http://www.investopedia.com/stock-analysis/072213/baker-hughes-still-playing-third-fiddle-bhi-slb-hal-wft.aspx

Seeking Alpha: Tough Conditions Burying The Quality Edge At C & J Energy Services

There's a school of thought out there that the best companies really show their stuff when their sectors come under serious pressure. While that is true in many cases, it is also true that sometimes conditions reach a point where the distinctions in company-to-company quality become effectively moot.

I believe that is what has happened to C & J Energy Services (CJES), as severe overcapacity in U.S. pressure pumping and expiring contracts have effectively overwhelmed the quality of the company's equipment and services. History suggests better days will come again, but the Street appears to already be baking that in and investors may find better bargains in other parts of the oil patch.

Follow this link to continue:
Tough Conditions Burying The Quality Edge At C & J Energy Services

Investopedia: Halliburton Has Gotten Interesting Again

Slipping oil prices have definitely taken the steam out of what had been a strong seasonal move in many oil service and equipment stocks. Even so, many in the oil and gas industry seem to think that rig counts have bottomed and that exploration and production activity will start picking up again in 2013 barring a major economic downturn. While the timing and magnitude of that recovery does present some risk to Halliburton (NYSE:HAL) investors, today's valuation looks like a pretty attractive entry point to play an eventual recovery in the services and equipment sector.

Please click below to read the full article:
http://www.investopedia.com/stock-analysis/042213/halliburton-has-gotten-interesting-again-hal-slb-bhi-wft-dov-lufk-ge-apa-cat.aspx

Investopedia: Schlumberger Looks Good At Today's Prices

For better or worse, Schlumberger (NYSE:SLB) is a stock that will give investors multiple second chances. Although this company is regarded as the best of the oil services companies, the ups and downs of the energy market (and the resulting impacts on exploration, drilling, and production activity) lead to wide swings in operating performance and the stock price. With surprisingly solid margins, signs of improvement in North American activity, and strong multi-year prospects in deepwater, subsea, and international projects, this could be a good time to consider these shares.

Please click below to continue:
http://www.investopedia.com/stock-analysis/042213/schlumberger-looks-good-todays-prices-slb-hal-bhi-cam.aspx

Investopedia: Dover May Be Bottoming, But The Street's Already Thinking Recovery

Dover (NYSE:DOV) is one of those industrial conglomerates that is so diversified, it's not hard to feel a little sympathy for the analysts that cover the stock. From energy to smartphones to commercial refrigerators and gas pumps, covers the gamut of end-market exposures.

To that end, it doesn't say anything especially great about the economy that first quarter results were pretty weak, though the book-to-bill and management's optimism about a second-half recovery are encouraging. When it comes to the stock, however, it's a little hard for me to believe that the Street hasn't already skipped ahead a few pages and priced this stock for a recovery.

Please follow the link for more:
http://www.investopedia.com/stock-analysis/041813/dover-may-be-bottoming-streets-already-thinking-recovery-dov-nov-bhi-dhr-itw.aspx