Despite macroeconomic challenges and geopolitical turmoil, the energy sector shows immense resilience. It is poised to maintain its momentum due to an expected rise in global demand for oil and gas this year on the backs of the reopened Chinese economy.
Given this backdrop, let us probe into the energy stock Weatherford International plc (WFRD), whose noteworthy growth prospects could make it a wise portfolio addition now.
WFRD is an energy services company that provides equipment and services for the drilling, evaluation, completion, production, and intervention of oil, geothermal, and natural gas wells worldwide. The company operates through three segments: Drilling and Evaluation; Well Construction and Completions; and Production and Intervention.
The company reported significant growth in its top and bottom line in the first quarter of 2023. Additionally, WFRD made senior notes repayments and repurchases of $62 million, comprising $20 million of its 11% Senior Unsecured Notes and $42 million of its 6.5% Senior Secured Notes.
On April 20, the company issued a notice to redeem the remaining $105 million of its 11% Senior Unsecured Notes due 2024 at a redemption price of 102.750% of the principal amount, plus accrued and unpaid interest to, but excluding the redemption date.
As per WFRD’s President and Chief Executive Officer, Girish Saligram, the redemption would be considered a crucial step toward improving its capital structure. He further anticipates WFRD’s overall revenue to grow by mid-teens year-over-year in 2023 and expects adjusted EBITDA margins to expand by at least 250 basis points year-over-year.
The stock has gained 120.7% over the past year and 43.7% over the past six months to close the last trading session at $60.69. Wall Street analysts expect the stock to reach $91.60 in the upcoming 12 months, indicating a potential upside of 50.9%.
Furthermore, the stock trades above the 100-day and 200-day moving averages of $58.31 and $45.97, respectively, indicating a bullish trend.
Here are the factors that could influence WFRD’s performance in the upcoming months:
Robust Financials
For the fiscal first quarter that ended March 31, 2023, WFRD’s total revenues stood at $1.19 billion, up 26.4% year-over-year, while its adjusted EBITDA increased 78.1% year-over-year to $269 million.
Net income attributable to WFRD stood at $72 million compared to a net loss of $80 million for the prior-year quarter. Its income per share came in at $0.97 compared to a loss per share of $1.14 for the year-ago quarter.
WFRD’s EBITDA has grown at a 34.7% CAGR over the past three years.
Impressive Profitability
WFRD’s trailing-12-month levered FCF margin of 8.93% is 49.1% higher than the industry average of 5.99%. Likewise, its trailing 12-month ROCE and ROTC of 36.97% and 12.13% are 55.5% and 11.1% higher than the industry averages of 23.77% and 10.92%, respectively.
Favorable Analyst Estimates
The consensus EPS estimate of $1.14 for the current quarter (ending June 2023) and $4.64 for the current year (ending December 2023) indicates substantial year-over-year increases.
Likewise, the consensus revenue estimates for the same periods of $1.24 billion and $4.98 billion reflect improvements of 16.1% and 14.9% year-over-year, respectively. Moreover, WFRD topped consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
POWR Ratings Reflect Promising Outlook
It is no surprise that WFRD has an overall B rating, equating to Buy in our POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. WFRD has a grade A for Growth, in sync with its robust financials and solid growth prospects.
In addition, the stock is also rated A for Momentum, justified as it is trading above its 100-day and 200-day moving averages. It has a B grade for Quality, consistent with its robust profitability.
WFRD ranks #2 of 92 stocks in the Energy – Oil & Gas industry.
Beyond what we have mentioned above, to see the additional POWR Ratings for Value, Stability, and Sentiment for WFRD, click here.
View all the top stocks in the Energy – Oil & Gas industry here.
Bottom Line
Multiple energy industry tailwinds, such as a rise in demand, and WFRD’s fundamental strength and effective operational execution, keep the company well-positioned for the upcoming quarters. The company’s solid financials and robust profitability could make it a wise portfolio addition now to garner significant returns.
How Does Weatherford International plc (WFRD) Stack up Against Its Peers?
While WFRD has been rated B, equating to a Buy, one can check out these other stocks within the Energy – Oil & Gas industry: Cheniere Energy, Inc. (LNG), which has an A (Strong Buy) rating, and Centennial Resource Development (CDEV) and Valero Energy Corp. (VLO), which have a B (Buy) rating.
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
WFRD shares were trading at $58.66 per share on Thursday morning, down $2.03 (-3.34%). Year-to-date, WFRD has gained 15.20%, versus a 8.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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