On Friday, CFRA raised the stock price target for Tenaris S.A. (TEN:IM) (NYSE: TS), a global manufacturer of steel pipes, to EUR21.00 from the previous EUR20.00, while maintaining a "Buy" rating.
The firm justified this increase by rolling over the valuation to a 2025 EV/EBITDA multiple of 6x, which is higher than the peer average of 5x. This decision was based on Tenaris's higher Return on Invested Capital (ROIC).
In the first quarter of 2024, Tenaris reported an EBITDA of $987 million, which showed a 33% decrease year-over-year but a 1% increase quarter-over-quarter. This performance was in line with CFRA's expectations and surpassed the consensus by 11%.
The analyst attributed the positive outcome against consensus to a better-than-anticipated margin. This was supported by strong international and offshore project activities, particularly in Asia and the Middle East & Africa region, which saw a 55% year-over-year increase, helping to offset the impact of softer pricing in the Americas.
Despite slow drilling activities and increased imports of Oil Country Tubular Goods (OCTG) in the U.S., Tenaris managed to maintain its sales volume above 1.0 million tons in the first quarter, a 7% decrease year-over-year, but a 4% rise from the prior quarter.
The company also managed to keep a resilient gross margin of 38% in the first quarter of 2024, which the analyst believes was due to the average tube cost falling in line with the 6% quarter-over-quarter drop in the average selling price.
Looking ahead, Tenaris anticipates that sales and margins will trend lower in the second quarter of 2024 due to declining OCTG prices in the Americas. The company has indicated that several of its mills will undergo maintenance in the third quarter of 2024.
InvestingPro Insights
As Tenaris S.A. navigates the challenges of a fluctuating market, real-time data from InvestingPro offers a comprehensive view of the company's financial health and potential. With a market capitalization of $19.59 billion and a robust P/E ratio of 5.67, Tenaris presents an intriguing valuation for investors considering the market average.
The adjusted P/E ratio for the last twelve months as of Q1 2024 further refines this figure to 5.6, suggesting a consistency in earnings relative to the company's share price.
The PEG ratio of 0.1 indicates that Tenaris's earnings growth rate is quite favorable when pegged against its P/E ratio, which could be a positive sign for investors looking for growth at a reasonable price.
Moreover, the company's revenue growth of 4.67% in the last twelve months as of Q1 2024, coupled with a strong gross profit margin of 41.97%, highlights its ability to maintain profitability despite market pressures.
InvestingPro Tips reveal an impressive dividend yield of 4.28%, which may appeal to income-focused investors, especially considering the substantial dividend growth of 135.29% in the same period. For readers interested in deeper insights, there are additional InvestingPro Tips available that can further guide investment decisions. To access these and benefit from the full suite of features, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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