On Friday, Goldman Sachs (NYSE:GS) updated its perspective on Weatherford International plc (NASDAQ:WFRD), elevating the oilfield service company's stock price target to $144 from $132, while preserving a Buy rating on the stock. The firm's analyst cited the stock's year-to-date performance, which outpaced its industry peers, and highlighted potential future growth drivers for the company.
Weatherford's stock has been recognized for its robust performance in comparison to its competitors since the beginning of the year. The analyst from Goldman Sachs noted that despite this strong performance, additional catalysts are anticipated in the second half of 2024.
These catalysts are expected to stem from the company's strategic approach to capital allocation, particularly with the potential introduction of a dividend and share repurchase program.
The analyst projects that Weatherford could attain long-term EBITDA margins of 28%, with the assumption of a steady annual revenue increase in the low-to-mid single digits. This financial health could translate to more than half of its EBITDA being converted to free cash flow, which would support the company's ongoing efforts to reduce debt and improve its interest coverage ratio.
Although Weatherford has not released official guidance, Goldman Sachs expects the company to reduce its gross debt by approximately $600 to $850 million by the end of 2025. This debt reduction is forecasted to align Weatherford's interest coverage with that of its service company peers.
The analyst anticipates that this financial strategy could lead to a return of capital to shareholders, through dividends and buybacks, of about 2% in the latter half of 2024, assuming capital expenditures stay around 5% of long-term revenue.
The potential for Weatherford to offer a roughly 2% dividend yield is seen as a factor that could attract income-focused investors, possibly serving as a catalyst for a reevaluation of the stock's multiple. The revised 12-month stock price target of $144 reflects a 15% upside from current levels, based on updated earnings estimates.
InvestingPro Insights
Weatherford International plc (NASDAQ:WFRD) has recently garnered attention with its strong market performance and strategic financial moves. According to InvestingPro data, Weatherford boasts an impressive market capitalization of $9.01 billion and a solid P/E ratio of 19.43. These figures underscore the company's substantial presence in the market and its value proposition to investors.
With a revenue growth of 15.9% over the last twelve months as of Q1 2024, Weatherford demonstrates robust financial health and potential for future expansion.
Furthermore, one of the InvestingPro Tips highlights that Weatherford is trading at a low P/E ratio relative to its near-term earnings growth, suggesting that the stock may be undervalued given its growth prospects. Another tip points to the company's high return over the last year, with a 112.43% one-year price total return, which is a testament to its strong performance in the market.
For investors seeking more in-depth analysis and additional InvestingPro Tips, a visit to https://www.investing.com/pro/WFRD could provide valuable insights. There are currently 14 additional tips available that could further inform investment decisions. To enhance the experience, users can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering a comprehensive toolset for evaluating stocks like Weatherford.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.