The Worleyparsons Limited (ASX: WOR) share price is gaining ground after resources engineering group reported improvements across all key metrics.
The WOR share price jumped 0.5% during lunch time trade to $15.21 when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is down 0.3%.
The company reported an 11.1% improvement in revenue to $2.57 billion while underlying earnings before interest and tax (EBIT) jumped 17.6% to $156.3 million for the six months ended December 2018.
Firing on all cylinders
The increase in its top and bottom-lines are encouraging but it's even better when its accompanied by bigger margins and a 25% increase in its interim dividend to 12.5 cents a share.
The good times could roll on with management commenting on improved market conditions for its energy and resources customers who are just starting on their "next cycle of investment" thanks to buoyant commodity prices.
The oil price has rebounded strongly and oil and gas companies are likely to continue stepping up production and exploration activities.
Much of the same can be said for mining companies and the 10% increase in the backlog of work on WorleyParsons book to $6.6 billion is a testament to the bright outlook ahead.
This is even before factoring the earnings contribution from its Jacobs ECR acquisition while will give WorleyParsons leverage to the booming US oil and gas market.
Investors have been patiently waiting for the deal to be bedded down and there had been concerns that the merger wouldn't be consummated.
However, it looks increasingly likely that the takeover will proceed with management expecting the transaction to be completed by late March or April this year.
Foolish takeaway
WorleyParsons represents a good alternative to investing in oil and gas stocks. I am not saying you shouldn't buy ASX energy stocks like the Santos Ltd (ASX: STO) share price, Oil Search Limited (ASX: OSH) share price or Woodside Petroleum Limited (ASX: WPL) share price, but WorleyParsons should be a big part of that mix.
The advantage of WorleyParsons over an oil stock is that it's one step removed from the widely fluctuating oil price.
As long as crude prices stay reasonably high, oil and gas companies will maintain or step up activities and this will drive demand for WorleyParsons services. It's like investing in the pick and shovel maker during a mining boom.
What's more, the stock looks inexpensive to me as it's trading on a FY20 consensus price-earnings multiple of around 16 times. That's only a touch above the broader market and WorleyParsons deserves a bigger premium given the bright outlook.
