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Investing.com - Citi lowered its price target on Helmerich & Payne (NYSE:HP) stock to $17.00 from $19.00 on Thursday, while maintaining a Neutral rating on the drilling contractor.
The price target reduction follows Helmerich & Payne’s recent business update announcing contract suspensions on nine additional rigs in Saudi Arabia, bringing the total suspension count to 26 in the country. Citi reduced its fiscal third-quarter gross profit forecast for HP (NYSE:HPQ)’s International segment by $2 million to $28 million.
The firm noted that the bigger impact would be felt in the fiscal fourth quarter, where it cut its segment gross profit forecast by $6.5 million to $26 million. Citi’s fiscal third-quarter EBITDA projection now stands at $230 million, while fourth-quarter EBITDA is expected to reach $203 million.
Citi’s third-quarter EBITDA estimate is just 1% below consensus, but its fourth-quarter projection now falls 9% below consensus expectations. The firm expects profitability improvements on Helmerich & Payne’s legacy rigs to partially mitigate the fiscal fourth-quarter decline.
While acknowledging that Helmerich & Payne remains cheap by historical standards, Citi maintained its Neutral rating, citing below-consensus EBITDA forecasts that suggest a slower rate of deleveraging for the company.
In other recent news, Helmerich & Payne has seen a series of changes in analyst ratings and price targets. Morgan Stanley (NYSE:MS) has increased its price target for Helmerich & Payne to $29, maintaining an Equalweight rating, reflecting adjustments in revenue and earnings per share estimates for the upcoming fiscal years. In contrast, Citi downgraded the stock from Buy to Neutral, lowering the price target to $19 due to expected declines in rig count and profit margins. Citi also revised its price target to $25 while maintaining a Buy rating, citing a lower U.S. rig count and reduced international margin expectations. Similarly, JPMorgan has cut its price target to $25, keeping a Neutral rating, following a weaker-than-expected company forecast and the suspension of rigs by Saudi Aramco (TADAWUL:2222). Helmerich & Payne is implementing initiatives to achieve significant synergies from its merger with KCA Deutag, targeting $50 to $75 million, surpassing the initial goal. The company plans to maintain a range of 143 to 149 active rigs in North America and is preparing to launch additional rigs in Saudi Arabia. Despite challenges, the company does not anticipate a decline in pricing for its rigs in Saudi Arabia.
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