Story updated at 10 a.m. to reflect market activity.
Weatehrford International gained 0.3% to $16.11 in morning trading.
The firm raised its price target for the oil and gas company to $19 from $15. The upgrade is due to a new management team, asset sales, debt reduction, and growing FCF according to analysts Angie Sedita, Sasha Sanwal, and Paul Choi.
"Our view is more tempered on both the asset sales and margin expansion," the analysts wrote.
"We are forecasting 2014 year-end margins of 14.5% vs mgmt guidance of high teens. If WFT can drive even half of the expected cost reductions and margin expansion it would imply roughly 20% upside to our 2015 EPS ests. On the asset sales, we believe there is risk to execution of the land IPO/spin and it will also be challenging to improve pressure pumping profitability. However, we believe with the enhanced management team and a detailed game plan, that WFT's profitability should slowly improve, FCF should grow and debt decline. Operationally the company could (and should) become a relatively more focused company, versus merely an asset roll-up that is spread too thin."
Separately, TheStreet Ratings team rates WEATHERFORD INTERNATIONAL as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate WEATHERFORD INTERNATIONAL (WFT) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.1%. Since the same quarter one year prior, revenues slightly increased by 0.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $326.00 million or 41.12% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 22.90%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The debt-to-equity ratio of 1.09 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, WFT maintains a poor quick ratio of 0.70, which illustrates the inability to avoid short-term cash problems.
- The gross profit margin for WEATHERFORD INTERNATIONAL is currently lower than what is desirable, coming in at 29.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.57% significantly trails the industry average.
- You can view the full analysis from the report here: WFT Ratings Report