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On Friday, CFRA analyst Stewart Glickman downgraded Helmerich & Payne (NYSE:HP) shares from Buy to Sell, significantly reducing the price target from $39.00 to $25.00. The revised target comes with a lowered earnings per share (EPS) forecast for the fiscal years 2025 and 2026, indicating a cautious stance on the company’s financial prospects.
Glickman’s assessment points to a 3.7x multiple of enterprise value to projected fiscal year 2026 EBITDA, a figure that falls below Helmerich & Payne’s historical forward average. This new valuation reflects rising apprehensions about the future of the land drilling market and its impact on the company.
The downgrade was influenced by a combination of factors, including the ongoing suspension of rig operations in Saudi Arabia, which continues to cast uncertainty due to the lack of clear resolution. Additionally, the analyst expressed concerns over the softness in international markets outside of Saudi Arabia and what was characterized as underwhelming guidance for North America in the upcoming March quarter.
In support of the downgrade, CFRA referenced the recent earnings report from ConocoPhillips (NYSE:COP), which hinted at a reduction in capital expenditure for 2025 in the Lower 48 states. This announcement is seen as a potential indicator of subdued customer demand for drilling rigs and related services, as producers may be adjusting to moderate price expectations.
Despite recognizing Helmerich & Payne as a premium entity within the land drilling sector, Glickman’s outlook remains unenthusiastic for the near term, citing strong macroeconomic headwinds that could pose challenges for the company. The analyst’s decision to downgrade the stock reflects a broader skepticism about the industry’s direction and Helmerich & Payne’s position within it.
In other recent news, Helmerich & Payne has seen a flurry of financial activity. CFRA analyst Stewart Glickman recently revised the price target for the company’s shares to $25 from $39, maintaining a Buy rating. This adjustment is based on concerns about the future of the land drilling market and a reduction in earnings per share estimates for fiscal years 2025 and 2026.
Despite a revenue miss and concerns about its international operations, Helmerich & Payne reported first-quarter earnings per share of $0.71, slightly above the analyst prediction. The company also completed the acquisition of KCA Deutag, aiming to establish itself as a global leader in onshore drilling.
Analyst Scott Gruber from Citi upgraded Helmerich & Payne stock from Neutral to Buy, anticipating a significant free cash flow yield following the KCA transaction. The company also announced a quarterly cash dividend of $0.25 per share.
The acquisition of KCA Deutag, however, was delayed to January 2025, marking a significant expansion for the company. These are the recent developments involving Helmerich & Payne, reflecting the company’s financial strategies and ongoing commitment to providing value to its shareholders.
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