Today’s news: KLX Energy Services (KLXE) reports third quarter results; stock market volatility presents buying opportunities.
KLX Energy Services (KLXE) reported third quarter results this morning. There’s only one analyst contributing to the consensus estimate, so there’s not much point in comparing results to one analyst’s predictions. Third quarter adjusted earnings per share (EPS) were $0.76, and revenue was $520 million.
Management raised their fiscal 2019 revenue guidance (year end Jan. 2020) to $740 million and guided FY19 EPS to $4.50. With a current share price of $19.80, the 2019 price/earnings ratio (P/E) on KLXE is 4.4. That number is ridiculously low, especially for a company with aggressive earnings growth. The problem is that KLX Energy is a tiny company with virtually no analyst coverage, and therefore word is not getting out that KLXE might be an attractive investment.
I can’t give a Buy recommendation to a company that has no analyst following. As a reminder, the stock is in the portfolio because we had previously owned KLX Inc., and then Boeing (BA) purchased the aerospace division of KLX, leaving the very-profitable KLX Energy as a standalone company. I’ll keep KLXE in the portfolio for a while. I expect the share price to eventually reflect the financial and business strength of the company. Hold.
We all saw U.S. stock markets exhibit exuberance on December 3 and then fear on December 4. I anticipate another strong upward move during the remainder of this week. Even if I’m wrong, stock market averages, oil prices, and most of our portfolio stocks are exhibiting very stable price charts, so the “buy low” recommendations that I’m about to make will work for both the bullish and neutral days ahead.
These seem to be the best “buy low” opportunities among our portfolio stocks:
Blackstone Group (BX) – At a share price of $32.71, the dividend yield on new purchases is approximately 7.4%, and there’s 19% capital gain potential as BX travels back to its September high of 39.
Delek U.S. Holdings (DK) – The stock barely fell on December 4, which reflects the inherent strength in its continued recovery from the October market correction and the likely bottoming process in oil prices.
Delta Air Lines (DAL) – The stock recently began reaching all-time highs. I believe DAL will promptly return to those highs and continue upward. You have a brief opportunity to buy on this pullback to 57.
Southwest Airlines (LUV) – The stock recently rose from a trading range, and has now pulled back a bit. I believe we’ll see a continued uptrend. The market favors airline stocks right now, so make sure you own at least one airline stock or ETF.
Total S.A. (TOT) – Patient growth & income investors should buy TOT while energy prices are stabilizing and TOT is yielding 5.4%. There’s 17% capital gain potential as TOT travels back to its September high of 65 in the coming year.
WestRock (WRK) – The stock barely fell on December 4, exhibiting strength as it continues its recovery from the October market correction.
There are many other attractive portfolio stocks, but the above present the most obviously attractive price charts, dividend yields and/or capital gain opportunities.