On Friday, RBC Capital Markets adjusted its price target for Helmerich & Payne (NYSE:HP (NYSE:HPQ)) shares, a drilling company, from $48 to $50, while keeping a Sector Perform rating on the stock. The modification follows the company's recent announcement of a $1.97 billion acquisition of KCA Deutag, an international drilling contractor.
The RBC analyst noted that Helmerich & Payne's third-quarter results were solid but were overshadowed by the significant acquisition. The deal is seen positively as it propels the company's international expansion efforts. However, RBC is taking a cautious stance, seeking further clarity on the company's free cash flow and debt repayment timeline before changing its neutral view.
The acquisition's impact on Helmerich & Payne's financials has led RBC to revise its forecasts for the company's earnings before interest, taxes, depreciation, and amortization (EBITDA). For the fiscal years 2024 and 2025, the estimates have been adjusted upward by 1% and 36%, respectively.
The analyst's commentary underscored a balanced outlook on the transaction, acknowledging the strategic benefits of the acquisition while also expressing the need for more information on how it will affect the company's financial health in the longer term. The raised price target reflects the anticipated positive effects of the acquisition on Helmerich & Payne's financial performance in the coming years.
In other recent news, Helmerich & Payne has been the subject of notable investor attention due to several key developments. The oilfield service company's stock was upgraded from Hold to Buy by CFRA, which also raised the price target to $47 from $44.
This followed the company's announcement of a strategic agreement to acquire KCA Deutag for $1.97 billion in cash, a move set to significantly bolster operations in the Middle East.
The acquisition will increase Helmerich & Payne's rig count in the region from 12 to 88, marking a substantial expansion of its presence. Furthermore, the deal is expected to more than triple the company's contracted backlog and potentially increase its international EBITDA to between 20% and 25% of total EBITDA. The company's operations will be reorganized into North America Solutions, International Solutions, and Offshore Solutions following the acquisition.
However, an investment firm has revised its EBITDA forecast for Helmerich & Payne for 2025, leading to a reduction in the company's stock target from $44.00 to $39.00.
Despite these adjustments, CFRA has revised its earnings estimates for the company, reducing the fiscal year 2024 EPS forecast by $0.11 to $3.51 and the fiscal year 2025 projection by $0.06 to $3.78. These are the latest developments in the company's ongoing strategic transformation.
InvestingPro Insights
In light of Helmerich & Payne's recent moves, including the acquisition of KCA Deutag, investors are keenly observing the company's financial health and growth trajectory. Real-time data from InvestingPro shows a market capitalization of $4.05 billion and a P/E ratio that stands at 12.03, indicating that the stock is trading at a low price relative to near-term earnings growth. This aligns with one of the InvestingPro Tips, which highlights the company's attractive valuation in the context of its earnings potential.
Additionally, the company's solid gross profit margin of 40.1% over the last twelve months as of Q3 2024 demonstrates its efficiency in managing costs relative to revenue. Furthermore, with a dividend yield of 4.09% as of the latest data, investors might find Helmerich & Payne an appealing option for income, especially considering the company's impressive history of maintaining dividend payments for 54 consecutive years.
For those seeking a more in-depth analysis, there are 6 additional InvestingPro Tips available, which could provide further insights into Helmerich & Payne's financials and market performance. Interested readers can access these tips at https://www.investing.com/pro/HP and may use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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