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On Wednesday, Piper Sandler analyst Derek Podhaizer adjusted the price target for Flowco Holdings (NYSE:FLOC) to $33.00, down from the previous $34.00, while maintaining an Overweight rating on the company’s shares. Currently trading at $19.98, the stock appears undervalued according to InvestingPro analysis. The revision follows Flowco’s recent earnings report, which did not meet the expectations set by analysts, though the company maintains a strong financial health score of 3.1 out of 5.
Flowco’s shares experienced a significant drop, plunging nearly 13% in a single day, a stark contrast to the otherwise flat performance of the Oil Services ETF (OIH). With a market capitalization of $1.81 billion and impressive revenue growth of 156.58% over the last twelve months, the stock’s decline was notably sharper than anticipated by Piper Sandler. This reaction came despite Flowco’s strong performance leading up to the earnings release, where it had outpaced the OIH with a 22% gain compared to OIH’s 10% in the past month. InvestingPro data reveals the company maintains a healthy current ratio of 3.45, indicating strong short-term liquidity.
The analyst pointed out several factors contributing to the day’s sell-off, including Flowco’s recent outperformance, which had raised the earnings expectations since the company’s initial public offering (IPO). Additionally, the company’s implied 2025 EBITDA guidance now sits 5% below the consensus. Despite the earnings miss, the company’s growth trajectory is still considered attractive due to its differentiated approach.
According to Podhaizer, the momentum from Flowco’s High-Pressure Gas Lift (HPGL) and Vapor Recovery Units (VRU) is being somewhat negated by weaker performance in conventional gas lift products and compression services. Moreover, technical factors such as limited trading liquidity have also contributed to the selling pressure on the stock.
Despite the price target reduction and the earnings miss, Piper Sandler remains optimistic about Flowco’s future. Trading at a P/E ratio of 6.52 with EBITDA of $245.04 million, the company shows strong fundamentals. The analyst believes in the company’s unique growth potential, citing structural reasons behind the adoption of HPGL, such as rising Gas-Oil Ratios (GORs) and lower total cost of ownership. Additionally, the expansion of VRUs into untapped midstream markets and Flowco’s innovative technology pipeline, including products like eGrizzly and SurgeFlow, are expected to continue fueling the company’s growth. For deeper insights into Flowco’s valuation and growth prospects, check out the comprehensive Pro Research Report available on InvestingPro, which includes detailed analysis of the company’s financial health and future potential.
In other recent news, FlowCo Holdings Inc. reported its Q4 2024 earnings with an earnings per share (EPS) of $2.23 and revenue of $186 million, reflecting a slight revenue decline of 1.8% quarter-over-quarter. Despite this, FlowCo continues to innovate, launching its first electric multi-well high-pressure gas lift unit. The company maintains a strong position in the U.S. onshore artificial lift market, contributing to its stable financial performance. Additionally, FlowCo projects its Q1 2025 Adjusted EBITDA to be between $74 million and $78 million, anticipating continued margin expansion.
FlowCo’s strategic focus on production optimization and technological innovation was emphasized by CEO Joe Bob during the earnings call. The company is also exploring potential mergers and acquisitions (M&A) opportunities and considering initiating a dividend. In analyst updates, Evercore ISI adjusted FlowCo’s stock target to $32 from $35, while maintaining an Outperform rating, highlighting the company’s strategic domestic manufacturing advantage in the oilfield services sector.
FlowCo’s vertically integrated and domestically sourced supply chain has been noted as a key strength, mitigating risks related to tariffs and supply chain disruptions. The company’s commitment to leveraging its domestic supply chain is seen as a defensive mechanism against market volatility. These recent developments indicate FlowCo’s strategic positioning to navigate current industry challenges.
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