On Monday, Jefferies upgraded Tenaris (BIT:TENR) S.A. (NYSE: TS) stock from Hold to Buy, simultaneously raising the price target to $47.00 from the previous $35.00.
The adjustment follows a positive outlook on the company's earnings potential, with a particular focus on the future performance in the year 2025. Trading near $37.77, Tenaris currently sits well above its 52-week low of $27.24, with InvestingPro analysis indicating the stock is currently undervalued.
The firm's revised forecast includes a 7% increase in the estimated EBITDA for the fiscal year 2025, now set at $3.0 billion. This upgrade is based on higher U.S. pricing assumptions. In the third-quarter guidance, Tenaris hinted at an approximate $700 million EBITDA for the first quarter of 2025.
Jefferies anticipates a gradual increase in earnings each quarter throughout the year, driven by both pricing and a recovery in volume. The company's current EBITDA stands at $3.23 billion, with InvestingPro data showing strong financial health scores across profitability and cash flow metrics.
The financial services company has modeled this growth assuming a steady recovery. The forecast suggests that Tenaris will experience a modest year-over-year growth of 3% in volume, with the fiscal year 2025 volume estimate standing at 4 million tons.
This new outlook by Jefferies reflects a confidence in Tenaris's ability to capitalize on market conditions to enhance its financial performance. The upgrade and price target raise suggest that the company is positioned well for the coming years, with expectations for continued improvement in its operational and financial metrics.
In other recent news, Tenaris reported mixed Q3 results, with a decrease in sales but an increase in EBITDA. Sales fell by 10% year-over-year to $2.9 billion, while EBITDA increased 6% sequentially to $688 million. Despite the sales decline, the company's EBITDA margin improved to 23.6%, and free cash flow remained strong at $373 million.
The company has made significant investments in plant modernization and secured contracts for offshore projects in multiple regions. Tenaris also announced a shareholder return of nearly $2 billion through dividends and buybacks. The company expects increased activity in North America due to customer budget resets and contract rollovers and anticipates a low-teens percentage increase in both volume and revenue in this region for Q1 2025.
In the midst of these developments, Tenaris has maintained a robust cash balance of $4 billion, which may facilitate future shareholder returns. The company is also focusing on leveraging competitive advantages through mergers and acquisitions rather than diversifying. These are some of the recent developments surrounding Tenaris.
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