Renewable energy sources are on the rise, but a breakthrough energy form discovery aside, oil will continue to be the world's most important commodity for at least 20 years, and probably for longer than that.And that bodes well for drillers and oil service companies, which is why I'm Reiterating my Buy rating for Oceaneering International (NYSE: OII), first recommended on April 7, 2009 at a price of $38.01. If you bought Oceaneering then, you're up more than 40%.
Oceaneering recently reported Q3 EPS of 90 cents, which was above Wall Street's estimate of 87-89 cents, and of course the stock sold-off. The sense was the Street was looking for higher FY2010 earnings guidance than the $3.25-$3.55 Oceaneering sees itself earning next year.
View the recent pull-back as a Buy opportunity: Oceaneering is rebounding roughly in-line with the recovering U.S./global economies, with its remotely operated vehicle (rov) business the key driver. Hence, plenty of upside remains for OII. The First Call FY2009/FY2010 EPS estimates for OII are $3.39 to $3.51.
Stock Analysis: Oceaneering International is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in OII now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your OII position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $22.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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