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Morgan Stanley Upgrades Helmerich & Payne To Equal Weight

Helmerich & Payne, Inc. NYSE:HP - Morgan Stanley Upgrades Helmerich & Payne To Equal Weight

Morgan Stanley has upgraded Helmerich & Payne, Inc. HP 4.85% to Equal Weight, as it sees the company as a defensive play within the sector, particularly relative to challenged offshore names.

"Data points from our conference suggest relative tightness in pockets of the high-spec rig market — notably Texas and Oklahoma — where HP has outsized share," analyst Ole Slorer wrote in a note.

"We see no reason to believe that HP will not share in these respective gains given its premium reputation and current ~25 percent share of working rigs in these regions," Slorer continued.

The analyst believes the company's activity data and earnings momentum to be "meaningfully better" than the sector at large and sees near-term outperformance in shares.

Further, Slorer said the Street's bearish stance on the stock on valuation is overdone as its net cash position and dividend support limits its bear case. That said, the analyst acknowledged that other names within the land drilling vertical could outperform HP longer-term due to higher financial leverage.

"We believe HP is a relative EW within the sector — similar to RES, we believe it offers an 'easy' way to play the US land theme without taking meaningful balance sheet risk," Slorer added.

Slorer also raised price target to $80 from $70, while the shares closed Friday's regular trading at $60.19. Based on Friday's close, the revised price target implies potential upside of 33 percent.

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Sep 2016Morgan StanleyUpgradesUnderweightEqual-weight
Aug 2016CitigroupMaintainsNeutral
Jul 2016JefferiesMaintainsUnderperform

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