The oilfield service sector is becoming an attractive investment option as demand resurges, driven by increasing oil prices and geopolitical tensions worldwide. Growth in deepwater projects and increased drilling activity are the drivers behind this expansion, supported by operations across various global regions.
Amid this backdrop, investors looking to invest in this industry might consider fundamentally sound oilfield services stocks like ChampionX Corporation (CHX), DNOW Inc. (DNOW), and MRC Global Inc. (MRC), poised for potential growth.
According to the OPEC World Oil Outlook (WOO), the energy demand is anticipated to increase by 24%, and oil consumption is poised to reach 120.1 million barrels/day by the year 2050. With that, the global oilfield services market is projected to reach $481.82 billion by 2032, exhibiting a CAGR of 6.7%.
Recently, actions by the Biden administration, including the partial relaxation of drilling restrictions and the sale of new drilling rights on federal lands, have provided additional momentum for the industry. Moreover, technological advancements are steering the oilfield services sector toward more efficient and environmentally friendly drilling practices, enhancing operational performance and sustainability.
With that in mind, let’s look at the fundamentals of the above-mentioned Energy - Services picks in detail:
Stock #3: ChampionX Corporation (CHX)
CHX provides chemistry solutions, artificial lift systems, engineered equipment, and technologies worldwide to oil and gas companies. It operates through four segments: Production Chemical Technologies; Production & Automation Technologies; Drilling Technologies; and Reservoir Chemical Technologies.
On August 16, CHX declared a quarterly dividend of $0.095 per share on the company’s common stock, payable to its shareholders on October 25, 2024. Its four-year average yield is 0.58%, while its annual dividend of $0.38 translates to a 1.22% yield on the current prices.
On July 9, CHX acquired RMSpumptools Limited, a designer and manufacturer of advanced mechanical and electrical solutions for complex artificial lift applications. This acquisition enhances CHX’s portfolio, enabling it to expand its opportunities in international markets, including the Middle East, Latin America, and global offshore projects, while ensuring high customer service.
In terms of forward EV/Sales, CHX is trading at 1.67x, 15.5% lower than the industry average of 1.97x.
For the six-month period that ended on June 30, 2024, CHX’s total revenue stood at $1.82 billion, while the company’s Reservoir Chemical Technologies segment reported revenue of $51.83 million, indicating a 4.4% growth from the prior-year period. Its gross profit increased 2.4% year-over-year to $579.05 million. CHX’s attributable net income came in at $165.49 million, up 3.9% year-over-year, while its earnings per share grew 7.6% from the year-ago value to $0.85.
Street expects revenue for the fiscal third quarter (ended September 2024) to increase 4.7% year-over-year to $983.54 million. Its EPS for the same period is expected to register a 24.9% growth from the prior year, settling at $0.51.
The stock has gained 6.2% over the past nine months to close the last trading session at $31.03.
CHX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CHX has a B grade for Growth, Momentum, and Quality. It is ranked #11 out of 50 stocks in the Energy - Services industry. Click here to see the additional ratings for CHX (Value, Stability, and Sentiment).
Stock #2: DNOW Inc. (DNOW)
DNOW is a global supplier of downstream energy and industrial products for petroleum refining, chemical processing, LNG terminals, power generation utilities, and customer on-site locations. Its offerings include consumable maintenance, repair and operating (MRO) supplies, pipe, manual and automated valves, fittings, flanges, gaskets, fasteners, electrical, instrumentation, artificial lift, etc.
In March, DNOW acquired Whitco Supply, LLC, strengthening its position in midstream, exploration and production, and related markets central to its growth strategy. This acquisition is expected to boost DNOW’s earnings and free cash flow, aligning with its commitment to enhance long-term value for shareholders.
In terms of forward GAAP P/E, DNOW is trading at 14.51x, which is 28.3% lower than the industry average of 20.23x. The stock’s forward EV/Sales ratio of 0.51x is 73.4% below the industry average of 1.91x. Also, its forward EV/EBITDA multiple of 7.22 compares to the industry average of 11.82x.
In the fiscal second quarter that ended on June 30, 2024, DNOW’s revenue increased 6.6% year-over-year to $633 million. Its EBITDA, excluding other costs, rose 6.4% from the year-ago value to $50 million. The company’s non-GAAP net income came in at $28 million, up 3.7% year-over-year, and its non-GAAP EPS remained flat year-over-year at $0.25.
Analysts expect DNOW’s revenue and EPS for the current year (ending December 2024) to be $2.39 billion and $0.87, respectively. For the fiscal year 2025, its revenue and EPS are expected to grow by 1.8% and 2.6% from the prior year to $2.43 billion and $0.89, respectively.
DNOW shares have surged 11.5% over the past nine months to close the last trading session at $12.62.
DNOW’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has a B grade for Value and Quality. Within the same industry, it is ranked #9. Click here to see DNOW’s ratings for Growth, Momentum, Stability, and Sentiment.
Stock #1: MRC Global Inc. (MRC)
MRC is a global distributor of pipes, valves, fittings, and other infrastructure products and services to diversified energy, industrial, and gas utility end markets. It provides supply chain solutions, technical product services, and a digital platform to its customers in the United States, Canada, and internationally.
On June 13, MRC announced an agreement with ExxonMobil in North America to be the primary provider of pipe, valves and fitting (PVF) products and services. This agreement allows MRC to maintain, repair, operate, and perform project work across ExxonMobil’s upstream and downstream facilities.
In terms of forward non-GAAP P/E, MRC is trading at 14.50x, 28.3% lower than the industry average of 20.23x. Likewise, the stock’s forward EV/Sales and Price/Sales multiples of 0.54 and 0.34 are 71.5% and 77.3% lower than their respective industry averages of 1.91 and 1.48.
MRC’s sales for the second quarter (ended June 30, 2024) came in at $832 million. It reported an adjusted EBITDA of $65 million, indicating a 3.2% growth from the prior year’s quarter. Also, the company’s adjusted attributable net income for the quarter amounted to $27 million or $0.31 per share, reflecting an increase of 22.7% and 19.2%, respectively, from the same period last year.
Analysts expect MRC’s revenue and EPS for the current year (ending December 2024) to be $3.22 billion and $0.88, respectively. For the fiscal year 2025, its revenue is expected to increase by 4.3% year-over-year to $3.36 billion, while its EPS is forecasted to settle at $1.15, indicating a 31.7% improvement over the prior year.
Over the past year, the stock has surged 23.8%, closing the last trading session at $12.69.
It’s no surprise that MRC has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B for Sentiment. Out of 50 stocks in the same industry, MRC is ranked #3.
Beyond what is stated above, we’ve also rated MRC for Growth, Momentum, Stability, and Quality. Get all MRC ratings here.
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CHX shares were trading at $31.14 per share on Wednesday afternoon, up $0.11 (+0.35%). Year-to-date, CHX has gained 7.49%, versus a 20.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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