On Wednesday, JPMorgan reiterated a Neutral rating for Liberty Oilfield Services (NYSE:LBRT) stock with a maintained price target of $25.00. The commentary from the firm highlighted Liberty Oilfield Services' acknowledgment of softer activity trends in the second quarter of 2024 during a recent energy conference.
The company had previously set an expectation for year-over-year EBITDA in 2024 to be flat compared to approximately $1.2 billion in 2023. However, Liberty Oilfield Services noted a greater-than-anticipated drop in frac demand since their initial guidance in January 2024.
Liberty Oilfield Services reported a slight decrease in its fleet count, now at approximately 41 fleets, down by one. The company is experiencing a higher amount of unutilized time in their frac schedule, attributed to a less tight market.
Even though most of Liberty Oilfield Services' fleets are under dedicated agreements, which usually include some schedule gaps, the company has found it challenging to fill these gaps during the current softer market period, leading to lower effective utilization.
JPMorgan analysts have adjusted their second quarter 2024 EBITDA estimate for Liberty Oilfield Services to $265 million, which falls below the consensus estimate of $273 million. Despite the softer activity, the firm noted that Liberty Oilfield Services has indicated pricing for natural gas burning equipment has remained resilient. This observation is in line with similar remarks from peers in the industry.
The firm also provided insights on the broader market, noting a decline in the Baker Hughes rig count to levels seen in early 2022, with the U.S. land count down by 42 rigs year-to-date to 560 rigs. This suggests a potential downward trend in North American spending for the second half of 2024, which could impact North America leveraged oilfield service companies.
JPMorgan's models now predict third and fourth quarter 2024 EBITDA for Liberty Oilfield Services at $268 million and $253 million, respectively, which are 8% and 4% below the consensus estimates of $292 million and $264 million.
In other recent news, Liberty Oilfield Services has been the center of several analyst evaluations and adjustments. Citi maintained a Buy rating on the company's stock, with a price target of $32.00, and highlighted the potential for Liberty to expand into non-oil and gas opportunities. This was followed by an upgrade from Citi from Neutral to Buy, based on a strong performance in the oilfield services sector and an improving business outlook.
Additionally, TD Cowen raised its price target for Liberty Oilfield to $21.00 while maintaining a Hold rating, acknowledging a potential seasonal improvement in free cash flow. RBC Capital Markets also reiterated an Outperform rating and increased its stock price target to $27, recognizing the company's consistent operational performance and positive industry trends.
ATB Capital Markets maintained an Outperform rating and raised its price target to $26, based on a strong free cash flow outlook and potential upside from increased rig and completion activity. These recent developments reflect a positive attention Liberty Oilfield Services has been receiving from various analysts.
InvestingPro Insights
As JPMorgan maintains a neutral stance on Liberty Oilfield Services (NYSE:LBRT), it's worth noting that the company's financial health appears robust according to recent InvestingPro data. With a market capitalization of $3.38 billion and a price-to-earnings (P/E) ratio standing at an attractive 7.18, investors may find Liberty's valuation compelling. The company's ability to generate cash flows that can cover interest payments and liquid assets surpassing short-term obligations, as highlighted in InvestingPro Tips, suggests a solid financial footing.
Moreover, the moderate level of debt and the anticipation of profitability this year, both from InvestingPro Tips, may reassure investors concerned about the softer activity trends in the second quarter of 2024. While the company's revenue has seen a slight contraction of 1.29% in the last twelve months as of Q1 2024, the gross profit margin remains healthy at 28.85%, indicating efficient cost management.
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