On Thursday, ATB Capital Markets adjusted its outlook on shares of Trican Well Service (TCW:CN) (OTC: OTC:TOLWF), increasing the price target to C$5.75 from C$5.50, while maintaining an Outperform rating on the stock. The revision follows the company's second-quarter earnings report, which was released after market close on July 30, 2024, where Trican reported EBITDA/EBITDAS of $40.7 million/$45.2 million, surpassing consensus expectations.
The favorable earnings were attributed to an unexpected shift of work from the third quarter to the second, which has also led to a slight decrease in the second half of 2024 estimates. Despite experiencing some pricing pressure, which has prompted a nearly 3% reduction in the 2024 EBITDA forecast, ATB Capital Markets is optimistic about the future, increasing its 2025 and 2026 EBITDA estimates by 3% and 5%, respectively.
The firm's positive outlook is based on the anticipated growth in the Canadian pumping market due to an increase in the service intensity of Canadian fracking operations and an expected rise in completion work in the coming year.
This surge is anticipated as natural gas demand climbs with the startup of North American LNG projects, including LNG Canada. The analyst also noted the potential additional EBITDA of $8 million to $10 million per year from Trican's recent investment in a new frac sand transload facility in British Columbia.
Trican's financial position is strong, with no debt on the balance sheet and a fleet upgrade program that is nearly complete. This positions the company to continue generating robust free cash flow (FCF), which is expected to be used for shareholder returns or investments in growth opportunities.
Although Trican has been actively repurchasing its stock, the pace may decrease with the stock price now above $5.00 per share. Nonetheless, there is potential for a dividend per share increase next year.
The stock is currently trading at multiples of 4.4 times the estimated 2024 EBITDA and 3.5 times the estimated 2025 EBITDA, reflecting a positive market sentiment towards the company's financial prospects.
In other recent news, Trican Well Service Ltd. reported strong second-quarter results in 2024, with a revenue increase of 20% year over year to $211.8 million. The company also reported an adjusted EBITDA of $40.7 million and positive earnings of $16.2 million. This performance was driven by significant growth in the fracturing division and steady operations in the cement and coiled tubing divisions.
Trican has formed a strategic partnership to develop a sand transloading facility, aimed at enhancing logistics and profitability. This investment is expected to add an additional EBITDA of $8 million to $10 million per year. The company is also optimistic about the growth in the Canadian pumping market due to an increase in the service intensity of Canadian fracking operations and an expected rise in completion work in the coming year.
ATB Capital Markets recently revised its outlook on Trican, increasing the price target to C$5.75 from C$5.50, while maintaining an Outperform rating on the stock. The firm's positive outlook is based on the anticipated growth in the Canadian pumping market and Trican's strong financial position, with no debt on the balance sheet and a fleet upgrade program that is nearly complete.
These are the recent developments surrounding Trican Well Service Ltd. The company's financial position is strong, with robust free cash flow expected to be used for shareholder returns or investments in growth opportunities. Despite some pricing pressure, Trican continues to generate positive earnings and maintain steady operations across its divisions.
InvestingPro Insights
Complementing the optimistic view from ATB Capital Markets, InvestingPro data highlights Trican Well Service's (OTC: TOLWF) strong financial metrics, which further support the company's solid position within the industry. With a market capitalization of $728.16 million and an attractive P/E ratio of 8.9, the company presents a compelling case for investors looking for value. Notably, Trican's share price is trading near its 52-week high, currently at 93.11% of this peak, reflecting investor confidence.
InvestingPro Tips suggest that Trican's management has been actively involved in share buybacks, demonstrating their belief in the company's value. Additionally, the company holds more cash than debt, providing financial flexibility and stability.
With analysts revising their earnings upwards for the upcoming period and a strong return over the last three months of 21.67%, Trican appears to be on a positive trajectory. It's worth mentioning that there are many more InvestingPro Tips available, which can provide deeper insights into Trican's performance and potential.
For investors interested in a more comprehensive analysis, additional InvestingPro Tips can be explored at: https://www.investing.com/pro/TOLWF.
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