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Is Analyst Sentiment toward Ensco Turning Bullish?

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ESV’s analyst recommendations

In this series, we’ll discuss analyst ratings and recommendations for offshore drillers, starting with Ensco (ESV).

Of the 32 analysts covering Ensco, 47% recommend a “buy” or some equivalent for ESV stock. Among the top offshore drilling stocks (IYE), Ensco has the highest percentage of “buy” recommendations, but 37% of the analysts are recommending the stock as a “hold.”

The remaining 16% recommend a “sell” for Ensco stock. Its consensus 12-month target price of $7.81 implies an upside of 5%, based on its current market price of $7.43 as of January 10, 2018.

During 2017, analysts have turned bullish on Ensco. One year ago, in January 2017, only 22% of the analysts recommended a “buy” or some equivalent for the stock.

In 2017, crude oil prices rose ~20%, and the offshore drilling industry showed signs of recovery. Although the road to recovery will be long and slow for the industry, the positive signs have made analysts bullish on offshore drilling stocks.

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Recent analyst changes

While it’s important to look at analyst ratings, recent changes to recommendations and target prices provide insight into the latest changes in the market sentiment for a stock.

On January 11, 2018, Simmons downgraded Ensco to “neutral,” from “overweight.” On the same day, Cowen and Company, raised its target price for Ensco to $6 from $4. With Brent prices well past $60, international and offshore projects could begin to accelerate, according to the lead analyst at Cowen. Cowen also raised its target price for Transocean (RIG), Noble (NE), and Rowan (RDC).

In October 2017, Deutsche Bank and HSBC initiated coverage of Ensco. HSBC recommends “buy,” while Deutsche Bank initiated its coverage with a “hold” rating. Notably, analyst David Hanes of Deutsche Bank doesn’t expect the market to give the company credit until Ensco generates cash flow.

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