Hornbeck Offshore Services (HOS): Underperformance Is an Opportunity
Stock Rating: 1-Overweight
Sector Rating: 2-Neutral
Price: US$ 20.68
Price Target: US$ 29.00
Current Year EPS: 3.10
Next Year EPS: 4.40
Market Cap: US$ 537 (m)
􀂃 Second quarter results for Hornbeck Offshore are likely to reveal very tough operating conditions in the Gulf of
Mexico shallow water. This is not surprising given the record low jackup rig count and commentary from 1Q
conference calls; however, the shares of Hornbeck have significantly underperformed in recent days as details
about market conditions have made their way to investors. We view this underperformance as an opportunity
and would accumulate shares on the weakness.
􀂃 For more details on the market please see our note released this morning "Tough Conditions in the GOM
Vessel Mkt."
􀂃 The shares have underperformed the OSX by over 1,200 basis points in the last two weeks and the S&P 500 by
2,400 basis points.
􀂃 The deepwater market remains resilient with high utilization for deepwater assets and stable dayrates. We
expect this to continue.
􀂃 We believe Hornbeck's 2009 earnings and EBITDA guidance may be revised lower.
􀂃 We are lowering our 2009 and 2010 EPS estimates to $3.10 (from $3.60) and $4.40 (from $4.85), respectively.