Thursday, Credit Suisse upgraded Nabors Industries Ltd. (NBR) shares to Outperform from Neutral and increased its price target to $30 from $22. The brokerage raised its 2010 EPS estimate to $1.20 from $1.06, while establishing its 2011 estimate of $1.95.
Analyst Jayaram upgraded the stock based on tightening conditions in the U.S. high-spec land rig market given increases in unconventional shale activity, which should benefit NBR disproportionately given the company's premium rig fleet. While the analyst remains cautious on the 2010 gas price outlook, he believes NBR shares are poised to outperform the peer group as consensus forecasts for 2010 and 2011 appear conservative. The analyst believes earnings surprise potential should support a further re-rating of the shares, particularly as investor focus shifts to 2011 valuations.
The analyst noted that marketed utilization for premium high-end land rigs is approaching full levels. As a result of unmet demand, operators are now engaged in newbuild discussions with drilling contractors such as Nabors and Helmerich & Payne (HP) for incremental capacity backed by term contracts at attractive margins.
While dayrates for higher-spec U.S. land rig dayrates have declined by 36% from the second quarter of 2008 peak, the analyst believes the industry is on the cusp of extracting some modest dayrate increases, particularly for high-spec rigs that appear to be in short supply.
The analyst said that NBR is one of the best positioned oilfield asset companies to benefit from secular growth in unconventional shale drilling given its leading market position for rigs drilling horizontally and/or directionally. On a regional basis, NBR is the most active contract driller in the Haynesville, Eagle Ford, and Bakken shale plays and has a burgeoning position in the Marcellus.
The analyst raised 2010 EPS estimate to reflect higher U.S. and Canada land rig utilization and a lower tax rate. While the analyst's forecast implies modest upside to consensus in 2010, he is introducing 2011 EPS of $1.95, which is 13% above consensus. The analyst increased his 12-month price target to $30 from $22, assuming 6.5 times his 2011 CFPS estimate that is well below the 9.6x long-term average cash flow multiple.
Currently, NBR is down $0.37 or 1.57% and trading at $23.22.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.