Morgan Stanley Reiterates OW Rating On RDC

Morgan Stanley is reiterating its Overweight rating on shares of Rowan Companies, Inc. (NYSE: RDC).

“Momentum in high-end jackups, especially in the N. Sea market, is a resounding theme among the offshore drillers this week,” Morgan Stanley writes. “RDC is by far the most levered to high-end jackups, with 68% of its jackups equipped with a 15K BoP and 42% of its jackups capable of working in the N. Sea and we believe newbuild jackup availability over the next 12 months, coupled with cost-saving efforts will be the key value driver for the stock.

“We are currently forecasting dayrates for newbuild rigs to grow at a 10% CAGR over the next two years, while we expect commodity jackup rates to remain flat given very weak utilization levels. RDC reported EPS of $0.45, above our estimate of $0.26 and consensus of $0.29.”

Morgan Stanley closed Friday at $42.45.