Have Oil Prices Driven E&C Stocks Too Low?

With oil prices down nearly 40% for the year, engineering and construction (E&C) firms have also taken a beating because a drop in oil & gas capital spending would directly impact their bottom line. While it’s true that oil & gas majors will need to reassess their asset allocation decisions to account for falling prices, Sterne Agee analysts Michael S. Dudas and Patrick Uotila argue that capex will still grow over the next five years and that E&C stock prices have fallen too low.

“Recent global crude oil pressure is forcing the market to digest updated policies, reassess energy supply/demand balances, and analyze impacts to energy infrastructure investments and regional project economics,” they write. “Energy-sensitive E&C names have...