FBR: HAL, SLB, BHI, WFT Oversold on Political Concerns

[Stocks-to-Watch]

Turmoil in and around oil-rich nations is behind much of the market’s pessimism.

However, FBR Capital Markets analyst Robert MacKenzie believes that the sell-off in some of the large cap oil services companies due to political unrest is overdone. In a research note out today, MacKenzie says that the losses seen by Halliburton (HAL) and Schlumberger (SLB), both rated Outperform, and Weatherford International (WFT) and Baker Hughes (BHI), both rated Market Perform, are too steep (although true long-term unrest would be more serious).

“Specifically, we estimate the impact on the companies would be a one to two cents in earnings per share for a one month shut down in Libya, while a broader shutdown in North Africa, including Algeria, Tunisia, and Egypt, would have more material effects,” he wrote. “If the shutdown were more widespread in the region, Halliburton and Weatherford would be the most exposed.”

MacKenzie maintained a $72 price target on Halliburton and a $100 price target on Schlumberger.

“We understand that operations in Libya are shutdown across the large cap oil service companies in our coverage universe,” he wrote. “Business in Egypt and Tunisia were previously halted but are ramping up again. We believe that Egypt is less of a concern; Baker Hughes indicated that at the worst point, Egyptian operations had only slipped 25%. Lastly, while problems in Algeria could escalate, little disruptions have occurred to date.”



Original Article Source by Barrons.com