Bernstein starts Tenaris, Vallourec at “outperform” on tight supply, cash flow

Investing.com -- Bernstein has initiated coverage on Tenaris (BIT:TENR) and Vallourec (EPA:VLLP) with "outperform" ratings, citing strong balance sheets, robust free cash flow, and tightening supply in the seamless tube market, in a note dated Monday. 

The analysts posted the coverage as part of their “Age of Maturity” series, framing both companies as well-positioned in a consolidating global oil services landscape.

Tenaris is trading at a 2025 EV/EBITDA multiple of 6.6x, a 36% discount to its 2000–24 average of 10.2x. 

The company holds a $4 billion net cash position and offers a free cash flow yield above 10%. Its current share price of €15.79 implies 27% upside to Bernstein’s €21.00 target.

A $1.2 billion share buyback launched in June 2025 is expected to reduce its 39% free float further. 

Milan Stock Exchange rules require a 25% minimum float, raising potential delisting questions by 2027. Tenaris also provides a distribution yield above 10%.

Vallourec, with a target price of €22.60, presents a 34% upside from its €16.33 trading level. The company, now debt-free, has refocused on premium tubes, which accounted for 90% of sales in 2024 compared to 40% in 2019. 

CEO Philippe Guillemot led this transformation by cutting production capacity to under 2 million tons and closing underperforming operations. Vallourec trades at 4.9x 2025 EV/EBITDA, with a >10% free cash flow yield and an 8.9% distribution yield.

Bernstein highlights that seamless oil and gas rolling capacity has remained flat at about 21.2 million tons since 2018, following capacity cuts by U.S. Steel and Vallourec. 

This suggests an undersupplied market not seen since 2013. Combined with an 18% YTD rise in steel prices, 50% U.S. steel import tariffs, and increased demand for premium tubes, the environment may support higher pricing in 2H25 and 2026.

The tariff advantage favors Vallourec, which produces 100% of its steel in the U.S., compared to Tenaris’s 28%.

Bernstein estimates the tariffs could lift Vallourec’s EBITDA by 5% (7% at constant euro-dollar parity), while a 4% U.S. price increase could offset headwinds for Tenaris.

Both companies are exposed to growing offshore and unconventional drilling markets. 

Tenaris has exposure to Argentina’s Vaca Muerta, while Vallourec may benefit from ArcelorMittal’s 28% stake, acquired in 2024 for €955 million.