H.C. Wainwright has maintained a Buy rating on Newpark Resources (NYSE: NYSE:NR) with a steady price target of $12.00 following the company's recent divestiture.
Newpark Resources completed the sale of its Fluids Systems segment to SCF Partners, Inc., a private equity firm, on September 13, 2024.
The transaction's base sale price was set at $127.5 million but was adjusted downward by $43.0 million due to a lower working capital balance than in 2023, and the consideration of $10.0 million in outstanding debt.
The final net sale consideration came to $56.0 million. This figure included $70.0 million in cash proceeds received at the closing of the deal, minus $19.0 million in foreign cash that was part of the business sold, and a $5.0 million interest-bearing seller note receivable.
According to the company's press release, the anticipated loss from the sale is expected to provide Newpark Resources with U.S. federal net operating loss tax benefits estimated between $7.0 million and $10.0 million.
The sale of the Fluids Systems segment marks a significant change for Newpark Resources, yet the investment firm's outlook on the stock remains positive. The Buy rating and price target reiteration reflect the firm's view on the company's prospects post-sale.
In other recent news, Newpark Resources has completed the sale of its Fluids Systems Segment to SCF Partners. The transaction, valued at approximately $85 million, is anticipated to result in a loss for the third quarter, with an expected addition of $7 million to $10 million in net operating losses.
B.Riley maintains its Buy rating on Newpark Resources, viewing the sale as a strategic move for the company to focus on its industrial mats business.
Newpark Resources also reported a positive second quarter, showing a 6% increase in revenues and a 10% rise in adjusted EBITDA, largely due to the strong performance of its Industrial Solutions business. The company is implementing a multiyear transformation plan, with an expected continuation of investments in the electrical grid.
The company has announced plans to use the proceeds from the sale to expand its composite matting fleet, potential acquisitions, and a share buyback program.
InvestingPro Insights
In light of Newpark Resources' recent strategic divestiture, real-time data and insights from InvestingPro provide a further glimpse into the company's financial health and market position. With a market capitalization of approximately $625.15 million and a price-to-earnings (P/E) ratio of 27.78, Newpark Resources is navigating the market with a moderate valuation. The adjusted P/E ratio for the last twelve months as of Q2 2024 stands slightly lower at 26.7, indicating a somewhat more favorable earnings perspective relative to the stock price.
InvestingPro Tips suggest that while Newpark Resources suffers from weak gross profit margins, currently at 20.1%, the company operates with a moderate level of debt and has liquid assets that exceed its short-term obligations. This could provide some financial flexibility in the post-divestiture phase. Additionally, analysts predict the company will be profitable this year, aligning with the positive outlook from H.C. Wainwright.
Despite recent revenue declines, with a -13.75% change over the last twelve months as of Q2 2024, the company's stock price movements have been quite volatile, offering both risks and opportunities for investors. For those interested in a deeper analysis, InvestingPro features a range of additional tips – there are 12 more tips available on the platform that could help investors make informed decisions regarding Newpark Resources' stock.
The company's year-to-date price total return as of the 263rd day of 2024 stands at 8.89%, showcasing some resilience in investor confidence. With the next earnings date set for October 29, 2024, and a fair value estimation by analysts at $11.5, compared to InvestingPro's fair value of $6.14, investors will be keenly watching for the company's financial performance and strategic moves going forward.
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