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On Thursday, Goldman Sachs adjusted its outlook for TechnipFMC (NYSE:FTI), reducing the price target from $36.00 to $33.00 while maintaining a Buy rating on the shares. The revision comes amidst a broader sell-off in small to mid-cap (SMID) service companies, which the firm believes offers opportunities for specific stocks, though certain conditions must be met for a significant recovery.
The analyst from Goldman Sachs noted that for a meaningful mean reversion in stock prices to occur, several clearing events are necessary. These include risks to full-year guidance, activity commentary in key markets, pricing conversations, capital allocation towards buybacks, balance sheet strength, and any unique downside protections. These factors are critical in informing investment decisions, especially leading into the first quarter of 2025.
For the first quarter of 2025, Goldman Sachs is slightly raising its estimates for TechnipFMC, citing idiosyncratic drivers that support the company's resilience compared to its peers. This resilience is attributed to TechnipFMC's backlog business, which provides long-term visibility. The firm is, however, adjusting its estimates for other SMID service companies slightly lower due to macroeconomic conditions.
Goldman Sachs also highlighted other stocks such as Weatherford International (Neutral rated NASDAQ:WFRD) and Expro Group (Neutral rated XPRO), pointing out significant price dislocations that could offer opportunities for mean reversion should macro conditions improve. Nevertheless, the firm maintains a Neutral rating on these stocks until more clarity emerges regarding potential clearing events.
In conclusion, Goldman Sachs sees TechnipFMC as a standout with estimates that remain robust versus its peers, driven by a strong backlog business that offers clear visibility into the future. The firm's stance remains cautiously optimistic, with a focus on specific events that could influence the sector's investment landscape.
In other recent news, Patterson-UTI (NASDAQ:PTEN) Energy reported a net loss for the fourth quarter of 2024, missing analyst expectations. The company recorded an earnings per share (EPS) of -$0.13, which fell short of the forecasted -$0.08, while revenue also came in below expectations at $1.162 billion compared to the anticipated $1.24 billion. Despite these financial setbacks, Patterson-UTI has maintained a consistent number of drilling rigs in operation, averaging 106 rigs actively earning revenue in the United States for March 2025. The company has expanded its natural gas-powered completion equipment offerings and plans to reduce capital expenditure further in 2025. Looking ahead, Patterson-UTI expects significant free cash flow generation in 2025, with plans to return at least 50% of this to shareholders. Analysts have noted that the company is exploring opportunities in power generation and expects steady drilling activity through most of the year. These developments reflect Patterson-UTI's strategic focus on maintaining operational efficiency and exploring growth opportunities in the natural gas market.
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