Diamond Offshore (NYSE:DO) Should Have Strong 2011 Says Goldman (NYSE:GS)

Diamond Offshore (NYSE:DO) should do well in 2011, says Goldman Sachs, based on what they consider is an underestimation of the earnings power of their midwater fleet.

Goldman said, "we think that the cyclical earnings power of its midwater fleet is underestimated. We expect midwater demand and pricing to surprise to the upside based a new analysis of the Top 280 projects and a high correlation (70%-80%) to oil prices with a one-year lag – i.e., 2011 should be strong."

Goldman Sachs upgraded Diamond Offshore from "Sell" to "Conviction Buy List." Diamond closed Friday at $70.57, gaining $3.28, or 4.87 percent. Goldman has a price target of $85 on them.