Diamond Offshore Drilling is the IBD Stock Of The Day for Friday. DO stock cleared an early buy point after already rising more than 50% in 2023. Diamond Offshore is benefiting from rebounding earnings and strong demand as oil prices trade around a one-year high.
Oil Prices Rose 7 Weeks In Row
U.S. crude oil futures rose 0.9% to $81.07 per barrel intraday Friday. Prices slumped 2.4% for the week, oil's first weekly decline in eight weeks. West Texas Intermediate futures surged to year-highs last Wednesday amid growing concerns of low supply.
Diamond Offshore provides contract drilling services for the energy industry. The Houston-based company operates a fleet of 12 offshore drilling rigs around the globe, eight semisubmersibles and four drill ships, according to its website.
For its Q2 report on Aug. 7, Diamond Offshore reported a 37% revenue jump to $281.56 million. It was the second straight quarter of accelerating earnings and beat estimates of $272.4 million. Earnings soared to $2.29 per share from a 22-cent loss a year earlier. Analysts polled by FactSet expected a loss of 14 cents per share.
The company's backlog ballooned by $229 million for the quarter, bringing the total to $1.6 billion.
For 2023, Diamond Offshore expects total revenue to increase about 13% to a range of $950 million to $960 million amid the rising oil prices. The company guided adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) between $105 and $120 million, compared to $35 million last year.
FactSet sees full-year EBITDA at $147 million on $1.03 billion in revenue.
DO stock ranks third in the Oil & Gas-Drilling group, according to IBD Stock Checkup. Rival Noble leads the group.
The market is in a correction, so investors should be cautious about new buys generally. But oil stocks are holding up with crude oil prices strong.
Diamond Offshore Stock
Diamond Offshore stock rose 2.8% on Friday to 15.62, clearing a downward-sloping trendline after a pullback to the 21-day line. Volume was well below average. Investors could use Wednesday's high of 15.52 as a specific trigger. Shares are several weeks into a possible new base.
Shares initially tumbled on Aug. 8 following Q2 results, briefly undercutting the 50-day line before slashing losses.
The relative strength line hit a new high Friday, even with DO stock still off recent highs. That's a bullish sign. The RS line tracks a stock's performance vs. the S&P 500 index.
Diamond Offshore stock has bolted 51% higher since Dec. 31 amid the rising oil prices, though most of the gains came since early June. Shares hit an all-time high 16.52 on July 18.
That capped a strong move from a prior consolidation cleared in late June.
The overall Oil & Gas-Drilling industry group is down 7% in 2023, but up 46% from a June 2 low.
DO stock has a perfect 99 Composite Rating, which combines various technical and fundamental indicators into one easy-to-read score. Diamond Offshore has an 81 EPS Rating. The stock's relative strength line is at 52-week highs and it has a 97 RS Rating.
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