Company Reports

After taking a second look at no-moat Weatherford International's second-quarter earnings release, we are reducing our fair value estimate to $91 per share from $94. This is largely the result of reevaluating our gross margin outlook to more accurately reflect the firm's near-term prospects. However, this does not change our view that the shares are slightly overvalued, given our Very High Morningstar Uncertainty Rating.

Weatherford International is one of the larger oilfield-services firms in an otherwise hyperfragmented industry. However, in terms of size, it remains some distance from the industry’s Big Three: SLB, Baker Hughes, and Halliburton.

Weatherford International is one of the larger oilfield-services firms in an otherwise hyperfragmented industry. However, in terms of size, it remains some distance from the industry’s Big Three: SLB, Baker Hughes, and Halliburton.

Weatherford International delivered a very strong second-quarter performance, and we expect the second half of the year will prove similarly favorable. Given our fortified confidence in the firm’s near-term prospects, we’re raising our fair value estimate to $93 from $85 following results. We still view shares as overvalued, as we believe the market is extrapolating the rise in drilling and completions activity recently displayed across international and offshore markets. Activity will remain elevated, but we expect growth to decelerate near decade-end.

Weatherford is one of the larger oilfield service firms in an otherwise hyper-fragmented industry. However, in terms of size, it remains some distance from the industry’s Big Three: Schlumberger, Baker Hughes, and Haliburton.

Weatherford is one of the larger oilfield service firms in an otherwise hyper-fragmented industry. However, in terms of size, it remains some distance from the industry’s Big Three: Schlumberger, Baker Hughes, and Haliburton.

Weatherford is one of the larger oilfield service firms in an otherwise hyper-fragmented industry. However, in terms of size, it remains some distance from the industry’s Big Three: Schlumberger, Baker Hughes, and Haliburton.

Weatherford International reported solid 2024 first-quarter results, with total revenue growing 15% year on year to $1.36 billion, in line with management’s guidance of double-digit growth. The firm’s international presence, which makes up around 80% of total revenue, proved favorable, offsetting recent demand softness in North America. Profitability also continued its steady expansion, with adjusted EBITDA expanding by 110 basis points sequentially to 24.7%, well exceeding the forecast increase of 25-50 basis points. Management indicated the firm will aim to hit its goal of 25% by year-end 2024. We maintain our $85 fair value estimate and still view shares as overvalued. We maintain our no-moat rating and Very High Morningstar Uncertainty Rating.

Weatherford is one of the larger oilfield service firms in an otherwise hyper-fragmented industry, but in terms of size, it remains some distance from the industry’s Big Three: Schlumberger, Baker Hughes, and Haliburton.

Weatherford is one of the larger oilfield service firms in an otherwise hyper-fragmented industry, but in terms of size, it remains some distance from the industry’s Big Three: Schlumberger, Baker Hughes, and Haliburton.

We’re raising our fair value estimate to $85 from $79 for Weatherford International after the firm delivered another quarter of solid performance that rounded out a strong overall fiscal 2023. The firm’s geographic diversification proved favorable during the year. Annual revenue increased 19% year over year, mainly due to elevated drilling and well construction activity across Latin America, Europe, and Africa, which make up exactly half of Weatherford’s overall business. Profitability also continued its steady expansion, with adjusted EBITDA exiting the year near a 23.5% margin, and management indicated the firm will continue progressing toward its goal of 25% throughout 2024.

Weatherford is one of the larger oilfield service firms in an otherwise hyper-fragmented industry, but in terms of size, it remains some distance from the industry’s Big Three: Schlumberger, Baker Hughes, and Haliburton.

Weatherford International delivered strong third-quarter results, with total revenue increasing 17% year over year and 3% sequentially, while the firmwide adjusted EBITDA margin jumped more than 400 basis points year over year to 23%. The firm benefited from its high exposure to international and offshore oil and gas markets, realizing superior returns compared with peers with a heavier North American tilt. Continued growth is likely, with offshore and international activity on track for a double-digit increase in fiscal 2024, according to management.

No-moat Weatherford posted another strong quarter, with total revenue increasing 20% year over year and 7% sequentially. The firmwide adjusted EBITDA margin held steady at 23% and will likely remain at a similar level through year-end. After incorporating second-quarter results, we’re raising our fair value estimate to $67 from $62 based on an improved outlook for Weatherford’s international operations, particularly the Middle East and Latin America. Management raised guidance for full-year guidance for revenue, now estimating mid- to high-single-digit growth year over year. It raised guidance for adjusted EBITDA margin by 100 basis points, implying year-over-year profitability improvements of at least 350 basis points year over year.

Weatherford is one of the larger oilfield service firms in an otherwise hyper-fragmented industry, but in terms of size, it remains some distance from the industry’s Big Three: Schlumberger, Baker Hughes, and Haliburton.

Weatherford is one of the larger oilfield service firms in an otherwise hyper-fragmented industry, but in terms of size, it remains some distance from the industry’s big three: Schlumberger, Baker Hughes, and Haliburton.

No-moat Weatherford beat its first-quarter guidance as several regional end markets proved much stronger than anticipated, further supported by earlier-than-expected contract additions (initially slated for the second quarter). Total revenue increased 26% year over year and decreased 2% sequentially, slightly less than the low- to mid-single-digit revenue drop typical of first-quarter performances. Profitability also outperformed expectations with the firmwide adjusted EBITDA margin approaching 23%. This reflects a more than 600 basis point increase year over year, nearly double the guidance management issued in February. Accelerating activity in international markets on top of this quarter's outperformance leaves Weatherford well-positioned for a very strong fiscal 2023. We're therefore raising our fair value estimate to $62 from $53 following the results.

We’re raising our fair value estimate for Weatherford International to $53 from $43 following an exceptional performance in 2022. We maintain our no-moat rating and stable moat trend. As a reminder, revenue increased 19% year over year while the firmwide adjusted EBITDA margin jumped 300 basis points to 19%, levels not achieved in over a decade. We nevertheless remain cautious in our long-term outlook and view shares as slightly overvalued at current prices. The operating environment for oilfield services is very favorable at present. Though Weatherford has undoubtedly made progress in its operational optimization strategy, we’re wary of how much of its recent success is attributable to internal initiatives versus external tailwinds.

Weatherford is one of the larger oilfield service firms in an otherwise hyper-fragmented industry, but in terms of size, it remains some distance from the industry’s big three: Schlumberger, Baker Hughes, and Haliburton.

Weatherford International finished 2022 strong, with fourth-quarter revenue increasing 25% year over year and 8% sequentially. The firmwide operating margin steadily expanded throughout 2022 and exited the year at 14%, quadrupling year over year. We’ll incorporate the firm’s full financial and operating results shortly, but for now, we maintain our no-moat rating, stable moat trend, and $43 fair value estimate.