Dark Days for Oilfield Services: SpotLight on 4 Key OFS Mid-Caps
Analyst recommendations
Wall Street analysts expect three of the four companies in our select group of mid-cap OFS (oilfield equipment and services) companies—Weatherford International (WFT), Core Laboratories (CLB), FMC Technologies (FTI), and RPC (RES)—to deliver positive returns over the next 12 months.
Analysts favor Baker Hughes
Approximately 68% of analysts tracking Weatherford International (WFT) have recommended a “buy” or equivalent for the company. Approximately 27% recommend a “hold,” and the rest recommended a “sell.” The analyst consensus target price for WFT is $8.96, and WFT is currently trading near $7.55, which implies an 18.7% return over the next 12 months.
Weatherford International is expected to generate steady free cash flow in fiscal 2016. It plans to lower net debt by 7% by the end of fiscal 2016 and expects to save $110 million from reduced severance and restructuring cost during the fiscal year. Despite challenges in the energy sector, Weatherford International remains one of the top picks for analysts in the OFS industry.
Recommendations for Core Laboratories and FMC Technologies
Approximately 59% of analysts tracking Core Laboratories (CLB) have recommended a “buy” or equivalent for the company. Approximately 29% recommended a “hold,” and the rest recommended a “sell.” The analyst consensus target price for CLB is $113.3, and CLB is currently trading at $114, which implies a -1% return over the next 12 months.
Approximately 51% of the analysts tracking FMC Technologies (FTI) have recommended a “buy” or equivalent for the company. Approximately 46% recommend a “hold,” and the rest recommended a “sell.” The analyst consensus target price for FTI is $31.06, and FTI is currently trading near $32, which implies a 12.8% return over the next 12 months. FTI makes up 0.9% of the Energy Select Sector SPDR ETF (XLE).
Why analysts are skeptical about RPC
Only ~48% of analysts tracking RPC (RES) have recommended a “buy” or equivalent. Approximately 48% have recommended a “hold” while the rest recommended “sell.” The analyst consensus target price for RES is near $13.5, and RES is currently trading near $13.4, which implies a 1.4% return over the next 12 months.
In its 4Q15 conference call, RPC expressed concerns about further energy price falls in North America as well as about difficulty in raising capital for upstream producers. RPC expects to cut capital expenditure further in 2016, and this has contributed to its low ratings from Wall Street analysts.