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On Thursday, Raymond (NSE:RYMD) James analyst James Rollyson adjusted Weatherford International plc’s (NASDAQ:WFRD) stock rating, downgrading it from "Strong Buy" to "Outperform." In conjunction with the rating change, the price target was also reduced from $73.00 to $69.00. According to InvestingPro data, three analysts have recently revised their earnings expectations downward, with price targets ranging from $66 to $90.
The downgrade comes as Weatherford faces continued challenges linked to its significant exposure in Mexico, where activity from Pemex, the state-owned petroleum company, has declined more than initially anticipated. Despite these headwinds, InvestingPro analysis shows the company maintains strong fundamentals with a healthy current ratio of 3.04 and generates substantial free cash flow. Rollyson noted that the company’s near-term results have been impacted by this downturn, although he anticipates a leveling off in the future.
The analyst highlighted the macroeconomic uncertainty that persists due to unresolved tariff issues and the need for clarity on geopolitical events, including OPEC+ plans. Despite these challenges, Weatherford’s management has updated its guidance, which includes the effects of certain asset sales, potentially setting a foundation for stabilizing estimates.
Rollyson also pointed out Weatherford’s focus on improving free cash flow conversion, returning capital to shareholders, and maintaining a strong balance sheet. This assessment is supported by InvestingPro data, which shows an impressive 16% free cash flow yield and assigns the company a "GREAT" financial health score. He remarked that the company is currently in a much more favorable position compared to previous market downturns.
In closing, the analyst emphasized that despite the adjustment in Weatherford’s stock rating and price target to $69.00, the valuation remains attractive when compared to its larger industry peers, trading at just 6.04 times earnings. The revision reflects a more cautious outlook as the market awaits greater clarity. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report.
In other recent news, Weatherford International PLC announced its first-quarter 2025 earnings, reporting an earnings per share (EPS) of $1.03, which exceeded analysts’ expectations of $0.92. The company’s revenue was in line with forecasts, totaling $1.19 billion. Despite facing challenging market conditions, Weatherford’s performance demonstrated resilience, with adjusted EBITDA margins reaching 21.2%. The company also reported an adjusted free cash flow of $66 million and a free cash flow conversion rate of 26.1%, an improvement from the previous year’s 24.4%. Looking ahead, Weatherford provided a revenue forecast for the second quarter of 2025 between $1.165 billion and $1.195 billion, with adjusted EBITDA expected to range from $245 million to $265 million. The company remains optimistic about growth opportunities in the Middle East and Asia, despite anticipated declines in North American and international revenues. CEO Girish Saligram emphasized the importance of maintaining margins and reassured investors about the stability of the company’s dividend.
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