On Thursday, Berenberg has revised its price target for Subsea 7 SA (SUBC:NO) (OTC: OTC:SUBCY) stock, an offshore energy services company, reducing it to NOK240.00 from the previous NOK245.00. Despite this alteration, the firm continues to recommend a Buy rating. According to InvestingPro data, the company, currently valued at $4.64 billion, trades at a relatively low P/E ratio compared to its near-term earnings growth potential.
The adjustment follows Subsea 7's announcement that it expects a 5% increase in top-line growth by FY25, with improved margins. This growth is attributed to the company's effective management of the robust offshore market conditions. In the third quarter, the company raised its FY24 guidance, largely due to high utilization rates, especially within its renewables fleet, which exceeded expectations.
The company has demonstrated strong momentum with a 17.15% revenue growth in the last twelve months, reaching $6.6 billion. InvestingPro subscribers can access 7 more key insights about Subsea 7's financial health and growth prospects.
The offshore sector is currently experiencing high activity levels, with a notable tightness in the offshore vessel market. This environment is deemed beneficial for Subsea 7, as it is well-positioned to take advantage of expanding margins. These factors are anticipated to contribute to a significant increase in free cash flow (FCF) generation for the next year. The company's current EBITDA stands at $827.1 million, with a healthy free cash flow yield of 10%.
Subsea 7's performance and strategic positioning prompted the analyst to maintain a positive outlook on the company's stock. The price target has been slightly adjusted, with the analyst stating, "We remain Buy-rated, but trim our price target to NOK240." This reflects confidence in the company's growth trajectory and its potential for continued financial success in the face of a dynamic offshore market.
In other recent news, Subsea 7 SA has been in the spotlight with mixed analyst adjustments and robust financial results. Berenberg reaffirmed its Buy rating on Subsea 7, highlighting the company's strong position to benefit from increased offshore capital expenditure and a significant backlog. The firm also noted Subsea 7's plan to distribute over USD1 billion to shareholders by 2027, reflecting confidence in its free cash flow generation.
In contrast, Jefferies lowered Subsea 7's stock target due to concerns over backlog, despite the company's strong performance in the second quarter and anticipation of a slight increase in the Group margin. The firm also noted potential influences on the free cash flow, particularly the acquisition of the vessel Seven Merlin.
Bernstein SocGen Group downgraded Subsea 7 from Outperform to Market Perform, primarily based on valuation grounds, but acknowledged the company's potential for strong free cash flow generation in the coming years.
In terms of financial results, Subsea 7 reported a significant increase in its financial performance for the second quarter of 2024, boasting a record high in order intake and backlog, amounting to $4 billion in new awards. The company forecasts full-year revenue to be between $6.5 billion and $6.8 billion, with adjusted EBITDA between $1 billion and $1.05 billion. These are the recent developments for Subsea 7.
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