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Hess Corporation (HES)

Jun 29 2008

Hess Corporation (HES)

Not quite at a 52 week high, Hess Corporation is a New York based  explorer, purchaser, and developer of oil and natural gas. The company’s stock is a decent buy from the normal gauges that I study. The industry is a little weak with refining margins remaining tight. But the company could break out of a chart pattern at $130 and rally on its very bullish earnings expectations.

Industry
    Although the individual industry has lacked others in the energy sector, the entire energy sector is very strong with the run up in price of both oil and natural gas. Oil and Gas refining and marketing is rated 44th over all the industries during the past 10 days. Within the industry Hess is a good revenue generator with 46% revenue growth year over year. It’s quarterly earnings growth is even better, second in the industry to Murphy Oil at 101% for the quarter on a year over year basis.
    
Earnings
    The company’s earnings potential is really what will draw your attention. Analyst have raised Hess’ expected earnings in the current quarter from 1.92 a share 90 days ago to 2.65 today. Similar earnings expectation raises are present across the board for next quarter, the year, and next year. The 16 analyst that rate the company’s yearly earnings have raised their expectations from 7.23 a share 90 days ago to 9.92 a share today.

Price/Earnings
    With the kind of earnings growth that is expected from Hess, the price of the stock must be at a pretty strong level compared to these earnings? But the price to earnings has remained low as the stock has traded in a range waiting for the refining margins to increase. A trailing P/E of 18.36 is attractive verses the revenue and earnings growth mentioned at 46% and 101% respectively.

The Trade
    If Hess breaks above the 130 level, I would begin to build a position in the stock. The earnings are just too good for this stock to stay at the levels it has remained recently.

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