Stifel has confirmed its Buy rating on shares of Tenaris S.A. (NYSE: TS) with a steady price target of $37.00.
The affirmation follows Tenaris's Investor Day event held at the London Stock Exchange, where the company's management presented their outlook on the oil and gas industry's future, specifically focusing on the demand and pricing of Oil Country Tubular Goods (OCTG).
During the event, Tenaris's management expressed a positive stance on the long-term demand for oil and gas. They also maintained their expectation for a multi-year upcycle in offshore spending. Despite acknowledging near-term challenges in OCTG demand and pricing, the company noted an increase in consumption per rig, which could positively impact the market.
Furthermore, Tenaris reiterated its guidance parameters for the second half of 2024, providing investors with a consistent outlook on the company's performance expectations. This guidance includes projections on financials, operations, and market conditions as foreseen by the company's leadership.
In addition to the operational insights, the management also signaled that they anticipate the Board to approve a new $700 million share repurchase program during the November 2024 meeting.
This potential buyback program is seen as a positive development for Tenaris's stock, suggesting confidence in the company's financial health and a commitment to returning value to shareholders.
In other recent news, Tenaris S.A. witnessed a decrease in sales and earnings in the second quarter of 2024. Sales fell to $3.3 billion, an 18% year-over-year decrease, while EBITDA dropped to $650 million, a 34% sequential decrease. Despite this, Tenaris managed to generate a substantial free cash flow of $774 million after dividends and share buybacks.
Stifel maintained a Buy rating on Tenaris but lowered the price target to $37.00, citing challenges such as increased imports of Oil Country Tubular Goods in the United States and high field inventories.
Simultaneously, JPMorgan reduced its price target from $43.00 to $35.00 while maintaining an Overweight rating due to a decrease in the firm's EBITDA forecasts for the third and fourth quarters of 2024. Both firms project Tenaris to continue generating strong free cash flow in the coming years.
InvestingPro Insights
InvestingPro data provides a deeper insight into Tenaris S.A.'s financial health and market performance. With an adjusted market capitalization of $17.21 billion and a trailing twelve months P/E ratio standing at a competitive 6.01, Tenaris demonstrates a robust valuation in its sector. The company's revenue for the last twelve months as of Q2 2024 sits at approximately $13.42 billion, despite a revenue decline of 9.42% in the same period. However, the gross profit margin remains strong at 38.93%, reflecting efficient operations.
Investors may find the dividend yield particularly attractive, currently at 5.22%, coupled with a significant dividend growth of 17.65% over the last twelve months as of Q2 2024. This is indicative of Tenaris's commitment to shareholder returns. The company's stock has also experienced a price total return of 1.68% over the past year, showing resilience in a volatile market.
InvestingPro Tips suggest looking at the fair value estimates, which point towards a potential undervaluation of Tenaris's stock. The InvestingPro fair value is calculated at $41.88, while the average analyst target sits at $35, both higher than the previous close price of $30.65. For investors seeking more comprehensive analysis, InvestingPro offers additional tips, with a count of more tips available on the platform to further inform investment decisions.
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