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Tuesday, Evercore ISI analysts adjusted their price target on Flowco Holdings (NYSE: FLOC), reducing it to $32.00 from the previous $35.00, while retaining an Outperform rating. With the stock currently trading at $19.98, InvestingPro analysis suggests the company is undervalued, supported by a remarkably low P/E ratio of 1.81. The analysts noted that Flowco’s business model, which is largely vertically integrated and relies on domestically sourced supply chains, has shielded the company from significant impacts of tariffs.
The broader oilfield services (OFS) sector has experienced capital spending cutbacks due to a mix of economic uncertainties, increased production from OPEC+ countries, and the repercussions of tariffs. Despite these challenges, Flowco has maintained impressive financial metrics, with a robust gross margin of 50.6% and strong revenue growth of 120% over the last twelve months. As competitors scramble to restructure their supply chains, Flowco’s strategy of domestic manufacturing for core technologies such as High-Pressure Gas Lift (HPGL) and Vapor Recovery Units (VRUs), in addition to other traditional gas system components, stands out in the industry.
Flowco Holdings operates six manufacturing facilities dedicated to both HPGL and conventional lift systems. This setup allows the company to have an operational edge by offering higher customer conversion rates and the agility to adjust production levels in response to market demands. The analysts highlighted that Flowco’s diversified supply chain network and its vertical integration are key advantages in the current market environment. InvestingPro data reveals the company’s strong financial position, with liquid assets exceeding short-term obligations by 3.26x, providing significant operational flexibility. For deeper insights into Flowco’s financial health and growth prospects, including exclusive ProTips and comprehensive analysis, check out the detailed Pro Research Report available on InvestingPro.
In their assessment, the analysts specifically mentioned that Flowco sources its compression systems from Ariel Corporation, with all products manufactured in Ohio. This strategic sourcing decision further mitigates the risk of tariff-related disruptions for Flowco.
The adjustment in Flowco’s price target reflects the current market conditions while acknowledging the company’s strategic positioning to navigate the challenges faced by the oilfield services sector. The maintained Outperform rating suggests that Evercore ISI analysts continue to see Flowco as a strong performer despite the recent adjustments in the market.
In other recent news, FlowCo Holdings Inc. announced its Q4 2024 earnings, reporting an earnings per share (EPS) of $2.23 and revenue of $186 million, marking a 1.8% decline in revenue quarter-over-quarter. Despite this slight dip, the company remains stable in its financial position, with an adjusted net income of $28.8 million and a consolidated adjusted EBITDA of $73.8 million, which remained flat compared to the previous quarter. FlowCo has launched its first electric multi-well high-pressure gas lift unit, continuing its trend of innovation in the market. The company is exploring potential mergers and acquisitions (M&A) and considering initiating dividends, indicating a strategic approach to growth and shareholder value. FlowCo projects its Q1 2025 adjusted EBITDA to be between $74 million and $78 million, maintaining similar capital investment levels in 2025. Analysts from JPMorgan and Jefferies have engaged with the company, highlighting its strong market position and the potential for expanding vapor recovery solutions in the midstream market. The company has a robust domestic supply chain, which helps mitigate risks associated with geopolitical instability and tariff changes.
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