Gold prices set for weekly drop as dollar surges; Trump tariff action in focus
On Monday, Citi analysts adjusted their stance on Helmerich & Payne (NYSE:HP), downgrading the stock from Buy to Neutral and reducing the price target to $19 from $25. The revised outlook is due to anticipated declines in active rig count and rates, which are expected to pressure profit margins into 2026.
The analysts foresee an 8.5% decrease in Helmerich & Payne’s active rig count, which translates to 13 fewer rigs, coupled with an approximate 10% fall in rates. This is predicted to result in a roughly 25% reduction in margins over the next few years. Despite projecting an increase in gross profit for the company’s International segment, from $27 million last quarter to $45 million in the second fiscal quarter of 2026, the forecast for corporate EBITDA suggests a contraction.
Citi’s projections indicate that Helmerich & Payne will generate an EBITDA of $875 million in 2025, which is 4% below the consensus, and $821 million in 2026, trailing by 14%. The forecasted free cash flow (FCF) stands at approximately $235 million for 2025 and around $210 million for 2026. These figures correspond to FCF to market cap yields of nearly 13% and almost 12% for 2025 and 2026, respectively. However, when considering FCF to enterprise value (EV) yields, the expected returns are around 7% for 2025 and approximately 6% for 2026.
The analysts have highlighted that these yields might be too modest to attract energy investors. The decision to lower the target price to $19 is rooted in the perceived risks to FCF generation. The new price target is based on a 4.0x 2025 EV/EBITDA multiple, compared to the current EV/EBITDA of 4.65x, aligning with the anticipated FCF to market cap yield of almost 12% over the two years, but with a FCF to EV yield of just over 6%. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this and 1,400+ other US stocks.
In other recent news, Helmerich & Payne announced its first-quarter 2025 earnings, surpassing Wall Street expectations with an earnings per share (EPS) of $0.88, compared to the forecasted $0.66. The company also reported revenue exceeding expectations, reaching over $1 billion, against the anticipated $992.2 million. Despite these positive results, Helmerich & Payne’s stock experienced a slight decline in after-hours trading, reflecting broader market uncertainties related to fluctuating oil prices. The company recently completed its acquisition of KCA Deutag, which is expected to enhance its long-term growth strategy.
Meanwhile, analyst firms have adjusted their outlooks on Helmerich & Payne. Citi reduced its price target for the company to $25 from $32, maintaining a Buy rating, while JPMorgan also lowered its target to $25 from $34, retaining a Neutral rating. These revisions reflect expectations of a lower U.S. rig count and decreased international margins. The company has announced initiatives to achieve synergies from its merger with KCA Deutag, aiming for $50 to $75 million in savings, surpassing the initial target of $25 million.
Patterson-UTI (NASDAQ:PTEN) Energy faced a downgrade from Citi, with its stock rating reduced from Buy to Neutral, and the price target lowered to $19 from $25. This adjustment is based on forecasts of declining rig counts, dayrates, and shrinking margins. Citi projects a decrease in EBITDA and free cash flow for Patterson-UTI Energy in the coming years, with a 2026 EBITDA forecast of $800 million, which is below the consensus estimates. These developments highlight the challenges faced by the company in maintaining investor interest amid declining returns.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.