On Friday, CapitalOne maintained its Equal-weight rating on Patterson-UTI Energy (NASDAQ:PTEN) stock, with a consistent price target of $15.00. The firm noted that Patterson-UTI Energy's performance was slightly better than the Oil Services ETF (OIH), despite falling short of adjusted EBITDA expectations. The company's shares edged up 0.1% in contrast to a 1.1% decline in the OIH at the time of the analyst's commentary.
Patterson-UTI Energy reported an adjusted EBITDA that was 3% below the consensus. The company also provided fourth quarter adjusted EBITDA guidance of approximately $225 million, which is 14% lower than the published consensus. This guidance reflects a cautious outlook, though it was somewhat anticipated following recent statements from Liberty Oilfield Services (NYSE:LBRT) and management's confidence that the fourth quarter completion activity is unusually weak and will begin to improve early in 2025.
The analyst highlighted that the management of Patterson-UTI Energy is confident that the fourth quarter completion activity, which they consider to be anomalously weak, will recover at the start of 2025. They are targeting margins that align with figures from the middle of 2024, when the adjusted gross margin averaged around $140 million per quarter. This is in contrast to the guidance for the fourth quarter of 2024, which sets the expected adjusted gross margin at approximately $85 million.
Patterson-UTI Energy's Completion Services segment is aiming to achieve margins similar to those seen in mid-2024. During that period, the adjusted gross margin averaged around $140 million per quarter. For the fourth quarter of 2024, however, the guidance suggests adjusted gross margins will be closer to $85 million, indicating a period of weaker performance that the company anticipates will be a temporary setback.
Overall, CapitalOne's stance on Patterson-UTI Energy remains unchanged despite the company's recent performance and future guidance indicating a dip in the near-term financial results. The firm's rating and price target suggest a neutral perspective on the stock's near-term prospects.
In other recent news, Patterson-UTI Energy Inc. faced a challenging third quarter in 2024, posting a significant net loss of $979 million, largely due to an $885 million goodwill impairment related to the NexTier merger. Despite this, the company maintained a steady revenue of $1,357 million and generated substantial free cash flow.
Adjusted net income was reported at $2 million, with adjusted EBITDA reaching $275 million. The company's CEO, Andy Hendricks, emphasized the successful integration of NexTier and Ulterra, which resulted in nearly $570 million in free cash flow post-merger. In terms of future expectations, Patterson-UTI anticipates an average of 106 active rigs in Q4, with slight reductions in margins due to seasonal factors.
The company also plans for a stable rig count in 2025, despite anticipating slightly lower activity levels compared to 2024. These recent developments highlight Patterson-UTI's focus on leveraging its integrated services model and strong cash flow to enhance shareholder value amid market challenges.
InvestingPro Insights
To complement CapitalOne's analysis of Patterson-UTI Energy (NASDAQ:PTEN), recent data from InvestingPro provides additional context to the company's financial situation and market position.
Despite the recent challenges highlighted in the article, InvestingPro Tips reveal that PTEN has maintained dividend payments for 21 consecutive years, demonstrating a commitment to shareholder returns even in volatile market conditions. This consistency aligns with the company's confidence in a recovery starting in 2025, as mentioned in the article.
Additionally, InvestingPro data shows that PTEN's revenue growth stands at an impressive 73.11% for the last twelve months as of Q3 2024, with a quarterly revenue growth of 34.19% in Q3 2024. These figures support the company's resilience in the face of the current market challenges discussed in the article.
However, it's worth noting that PTEN is currently trading near its 52-week low, with a Price % of 52 Week High at 59.97%. This metric reflects the market's current cautious stance, which is in line with the company's lower Q4 guidance mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for PTEN, providing a deeper understanding of the company's financial health and market position.
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