Benchmark cuts Weatherford stock target to $125 from $140, keeps Buy rating

On Friday, Benchmark analyst team at the firm led by Chris Kuhn and Kurt Hallead revised their price target on Weatherford International plc (NASDAQ:WFRD) shares, reducing it to $125 from the previous $140 while sustaining a Buy rating for the stock. The analysts noted that Weatherford’s stock is currently trading at 50% below its long-term average enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple, with a current EV/EBITDA of 4.38x and P/E ratio of 9.72x. This is despite the company achieving higher margins and free cash flow (FCF) than at any previous point in its history. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value estimates.

The analysts highlighted Weatherford’s financial performance, indicating that the company’s valuation could support a higher stock price. They pointed out that Weatherford’s current trading level does not reflect its improved profitability and cash generation capabilities. The assessment suggests that the stock may be undervalued given its historical financial multiples and recent financial achievements. This view is supported by InvestingPro data, which shows a GREAT overall financial health score of 3.21 out of 5.

Weatherford International has been focusing on enhancing its margins and generating increased free cash flow, efforts that are reflected in the company’s historical financial performance. The company maintains an impressive free cash flow yield of 13% and a gross profit margin of 25%. The analysts at Benchmark consider these improvements as significant, particularly when compared to the company’s past financial results.

Despite the reduced price target, the Benchmark team’s continued endorsement of a Buy rating implies a positive outlook on Weatherford’s stock. The analysts’ comments indicate a belief that the stock has the potential to rise and that its current market valuation does not fully account for the company’s financial performance.

The adjustment in Weatherford’s price target by Benchmark follows the firm’s analysis of the company’s trading multiples and financial outcomes. The new target of $125, although lower than the previous target, still represents a vote of confidence from the analysts in the company’s stock performance potential.

In other recent news, Weatherford International plc has been the focus of several developments. Citi analyst Scott Gruber has adjusted the price target for Weatherford to $90, down from the previous $95, citing concerns over a significant downturn in upstream spending in Mexico and potential reductions in activity in Russia. This adjustment comes after a previous downgrade to $95 from $110 due to similar concerns. Gruber’s analysis indicates a potential 25-30% reduction in spending in Mexico, which is particularly impactful for Weatherford, as the company earns approximately 12% of its revenue from the region.

These developments have led to a downward revision in Weatherford’s first quarter EBITDA to $273 million, an 8% decrease, and a 7% reduction in the forecast for 2025 EBITDA, now set at $1.18 billion. Despite these adjustments, the stock continues to be recommended as a Buy by Citi.

In other recent developments, Weatherford secured a three-year contract to deliver rigless services for the reactivation of onshore wells for the Abu Dhabi National Oil Company (ADNOC), set to commence in the fourth quarter of 2024. This partnership reflects Weatherford’s ongoing mission to deliver advanced, sustainable solutions in the energy sector.

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