Evercore ISI has updated its outlook on Weatherford International plc (NASDAQ: NASDAQ:WFRD), lowering the price target to $142.00 from $149.00, while maintaining an Outperform rating on the stock.
The firm's analysis indicates that despite a somewhat weaker near-term outlook, Weatherford is poised to benefit from a favorable geographical mix and the sustained international and offshore market upcycle.
The report suggests that growth expectations in key regions such as the Middle East, Latin America, and Asia have been adjusted and are anticipated to stay moderate into 2025.
Nevertheless, Weatherford's efficient cost structure and cost reduction initiatives, including supply chain optimization and the adoption of a low-cost country sourcing strategy, are expected to bolster margins to high-20s percentages in the coming years.
In other recent news, Weatherford International reported steady growth in its third-quarter earnings, maintaining an adjusted EBITDA margin of 25.2% and generating an adjusted free cash flow of $184 million.
The company's revenue remained stable sequentially but saw a 7% increase from the previous year, largely driven by a 9% rise in international revenue. Weatherford also announced the initiation of a capital return program, which includes a quarterly dividend and share repurchases.
The company has also provided insights into strategic acquisitions and technology enhancements, aiming to drive future growth and margin expansion. Weatherford anticipates flat to low-single-digit revenue growth in the fourth quarter, with a consistent adjusted EBITDA margin of around 25%. The full-year guidance includes over $500 million in adjusted free cash flow and an expected annual EBITDA growth of approximately 20%.
Despite facing challenges in Latin America and scheduling shifts in the Middle East and North Africa, the company has achieved fourteen consecutive quarters of year-over-year international revenue growth. Weatherford completed four smaller acquisitions this year, enhancing its portfolio without significant gaps.
InvestingPro Insights
Recent InvestingPro data and tips provide additional context to Evercore ISI's analysis of Weatherford International plc (NASDAQ:WFRD). Despite the lowered price target, the company's financials show some promising signs. Weatherford's P/E ratio of 11.76 and a PEG ratio of 0.22 suggest the stock may be undervalued relative to its earnings growth potential, aligning with the InvestingPro Tip that it's "Trading at a low P/E ratio relative to near-term earnings growth."
The company's revenue growth of 11.08% over the last twelve months and an EBITDA growth of 15.49% in the same period demonstrate the operational strength that Evercore ISI highlighted. This performance supports the InvestingPro Tip that Weatherford has been "Profitable over the last twelve months."
However, investors should note that the stock has experienced significant price declines recently, with a 33.07% drop over the past three months. This aligns with the InvestingPro Tip that the "Price has fallen significantly over the last three months," potentially creating an entry point for investors who agree with Evercore's positive long-term outlook.
For a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide deeper insights into Weatherford's financial health and market position.
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