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Bubbling Up At Dresser

With infrastructure spending in the oil-and-gas industry starting to rise, Dresser-Rand Group (DRC), a leading maker of large compressors, turbines, and control systems, is catching the eye of investors. Its stock has spiraled from 18 in early October to 27.94 on Mar. 21. Dresser is benefiting from the large projects worldwide of major oil-and-gas companies, says Robert Starbuck of Schroder Investment Management, which owns shares. Its financials have been solid, but "the growth part of the story has yet to kick in," says David Anderson of UBS (UBS), who has a "buy" rating. (UBS has done banking for Dresser.) Increased spending for floating platforms, refineries, pipelines, and liquefied natural gas plants, he adds, has boosted demand through the end of the decade. Compressors are "critical long-lead items" in refinery and upstream projects, and prices are starting to reflect this, says Ole Storer of Morgan Stanley (MS), which has done banking for Dresser. He rates the stock "overweight," with a 12-month target of 35. Storer projects earnings of $1.67 a share for 2007, $2.20 for 2008, and $2.63 for 2009. CEO Vincent Volpe says many of Dresser's clients have announced higher capital spending budgets for 2007. Dresser has alliances with such big clients as Marathon Oil (MRO), Shell Chemicals (RDS), ExxonMobil (XOM), and Chevron (CVX).

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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