STX OSV

STX OSV; Citigroup opines the shipbuilder’s post-results share-price correction offers an attractive buying opportunity as investors may have taken an overly bearish view with risks being mispriced. House reasons that 3Q12 revenue declined 26% qoq largely on normal fluctuations from project recognition, which is typically lower at construction's tail-end. While management's 3Q12 outlook highlighted low core AHTS and PSV segment activity and financing constraints hindering OSCV contract wins, comments from customers indicate the outlook has not changed materially since 2Q12. Although the risk of weaker-than-expected order wins should not be overlooked, Citi believes the weaker 3Q12 order wins were more likely due to lumpy contract wins rather than severe outlook deterioration. Weaker 3Q Ebitda margins were largely on a smaller labor-cost fall vs the revenue decline. It maintains its Buy call but cuts its target price to $1.70 from $1.95 after lowering FY13-14 earnings estimates by 8-11% on lower margin estimates, in line with management guidance, and on a lower 9x 2013 P/E multiple vs 10X previously.