A price target of $26 was set for the onshore contract drilling service company, down from its previous mark of $43.
The firm said it removed the Patterson-UTI Energy from its Conviction Buy List because customer capital spending should see cuts leading to a sharp fall in rig count, and because companies with U.S. land leverage face a reduced outlook.
"We believe it will be very difficult for a land drilling stock to work if commodity prices continue to fall and go below the economic threshold of some shale plays," analyst at Goldman Sachs said. "We see further downside should oil prices fall from current levels, as we expect."
Separately, TheStreet Ratings team rates PATTERSON-UTI ENERGY INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PATTERSON-UTI ENERGY INC (PTEN) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- PTEN's revenue growth has slightly outpaced the industry average of 9.9%. Since the same quarter one year prior, revenues rose by 15.7%. 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.
- PATTERSON-UTI ENERGY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, PATTERSON-UTI ENERGY INC reported lower earnings of $1.28 versus $1.95 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus $1.28).
- 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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 78.5% when compared to the same quarter one year ago, falling from $74.42 million to $15.98 million.
- The gross profit margin for PATTERSON-UTI ENERGY INC is currently lower than what is desirable, coming in at 33.48%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.88% significantly trails the industry average.
- You can view the full analysis from the report here: PTEN Ratings Report