Goldman Sachs downgrades Weatherford International to neutral amid debt concerns
- Goldman Sachs analyst Ati Modak has downgraded Weatherford International plc WFRD to Neutral with a reduced target price of $98.
- The assessment indicates that the current market environment makes Weatherford’s international focus less attractive compared to alternative energy investments.
- Despite expected earnings growth and successful technological innovations, a strategic focus on debt reduction and shareholder returns has taken precedence.
In the current announcement from Goldman Sachs on December 13, 2024, it was determined that Weatherford International plc (WFRD) would be downgraded to a Neutral rating from a previous rating, and the target price was adjusted down to $98 from $132. The analyst, Ati Modak, highlighted that although Weatherford continues to be viewed positively due to its high-quality stock and solid execution record, the prevailing market environment has rendered international energy investments less appealing compared to other options. Among the significant factors influencing this reevaluation is the ongoing global energy landscape that emphasizes risk reduction and stable returns. The analysis anticipates some potential earnings growth for Weatherford, particularly citing technological advancements such as Managed Pressure Drilling and RFID innovations. These developments are expected to contribute positively even if revenue growth remains flat. Modak elaborates on the expected growth and margin expansion that could result from these innovations despite the broader challenges in the market. Additionally, the anticipated debt reduction plan amounting to $500 million by 2025 could provide a theoretical added value of about $9 per share, yet the current strategic focus remains on improving shareholder returns through systematic deleveraging. This strategic priority speaks volumes about the company's resilience and commitment to improving its financial obligations in the face of fluctuating market conditions. Moreover, the analyst has modified EBITDA estimates for the years 2025 and 2026, signaling a slight decline. The 2025 estimate has been revised down by 3%, while the 2026 estimate is down by a notable 8%. These adjustments reflect more cautious expectations concerning activity and capital returns in light of recent trends. Investors looking for exposure to Weatherford stock were also encouraged to consider specific investment vehicles, like the Invesco Dorsey Wright Energy Momentum ETF PXI and PXJ, which offer indirect engagement with Weatherford’s performance. This provides investors with a nuanced path to navigate the evolving energy market while still capitalizing on potential opportunities with Weatherford International.