Bristow: Rotor Returns

03/03/2014 7:00 am EST


Roy Ward

Chief Analyst, Cabot Benjamin Graham Value Investor

Our latest featured stock is recommended based on its low price to book value ratio; the company recommendation is a leading provider of helicopter services to the worldwide energy industry, explains J. Royden Ward, editor of Cabot Benjamin Graham Value Investor.

Based in Houston and founded in 1969, Bristow Group (BRS) has major transportation operations in the US Gulf of Mexico and the North Sea.

Bristow also operates in most of the other major offshore oil and gas producing regions of the world, including Alaska, Australia, Brazil, Mexico, Nigeria, Russia, and Trinidad.

Additionally, the company is a leading provider of production management services for oil and gas production facilities in the US Gulf of Mexico.

Revenues climbed 11% and EPS surged 58% during the 12 months ended December 31, 2013. Demand for helicopter services in the Gulf of Mexico is picking up and sales in Europe and West Africa are becoming strong.

Fourth quarter earnings were hurt by delayed orders, which spilled over into the 2014 first quarter. The company has begun a huge new contract with the United Kingdom where it will conduct all search and rescue operations.

Separately, Bristow will add 33 aircraft by the end of 2014, which will add significant sales and earnings during the next two to three years.

Sales will likely rise 9% and EPS will climb 16% during the next 12 months ending December 31, 2014. Results could exceed my estimates if demand for Bristow's services in the Gulf of Mexico, Canada, or the North Sea increase more than expected.

The current P/E of 14.8 and the dividend yield of 1.3% provide excellent value. Buy BRS at the current price; I expect the stock to rise to my minimum sell price target of $90.31 within one year.

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