Thursday, Credit Suisse downgraded Oil States International Inc. (OIS) shares to Neutral from Outperform with a price target of $42.
Reflecting a tactical shift in ratings, analyst Jayaram is downgrading OIS shares to Neutral from Outperform on price. While the shares remain attractively valued relative to historic levels, the analyst believes a Neutral rating is now warranted as the key part of his investment thesis-earnings accretion and multiple expansion from an accommodation services contract at Kearl-has largely played out, resulting in a more balanced risk/reward vs. the peer group.
The analyst noted that on December 15, OIS was awarded a contract with Imperial Oil to provide Accommodation Services at the Kearl Oil Sands project at better than expected terms (revenues of $460 million vs. his estimate of $362 million and EBITDA margins in the low-40% range vs. his forecast of 35%). That said, the analyst believes the contract appears priced in the shares given the meaningful outperformance of the stock in anticipation of the award.
Despite the downgrade, the analyst continues to view OIS as a core holding for small cap OFS investors given continued execution and a strong management team. The analyst believes OIS could post fourth quarter of 2009 EPS of $0.55-$0.58 versus his and the Street's published $0.49.
The potential sources of the EPS surprise could be the company's Rental Tools and Land Drilling segments that tend to move coincident with drilling activity as the analyst has modeled relatively flat revenues and margins versus a 13% estimated increase in onshore U.S. spending per his QualRig model. In addition, the analyst sees potential for upside from the company's Accommodations segment given higher than expected activity trends in Canada as well as a currency tailwind given the appreciation of the Canadian Dollar vs. the U.S. Dollar.
Currently, OIS is down $1.14 or 2.96% and trading at $37.36.
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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.