US Silica Holdings (SLCA – Research Report), the Energy sector company, was revisited by a Wall Street analyst yesterday. Analyst Stephen Gengaro from Stifel Nicolaus downgraded the rating on the stock to a Hold and gave it a $15.50 price target.
Stephen Gengaro has given his Hold rating due to a combination of factors including the recent bid by Apollo to acquire US Silica Holdings at a price of $15.50 per share. The bid represents a premium over the recent closing prices and the volume-weighted average price, suggesting a fair offer for the company’s shares. Additionally, the deal includes a “go-shop” period of 45 days, yet Gengaro is not inclined to recommend the stock on the speculation that a higher offer might appear. He finds the probability of a competing bid, either from public oil and gas companies or private entities, to be unlikely, and thus does not see buying the shares in anticipation of a bidding war as a prudent strategy.
Gengaro’s assessment also includes a valuation analysis, where the acquisition price suggests a multiple of about 5.5x the 2024 adjusted EBITDA estimate, a multiple he deems reasonable in light of the stock’s recent trading range. He compares this valuation to a recent similar transaction and suggests that US Silica’s Industrial & Specialty Products (ISP) business warrants a higher multiple than the oil and gas segment, justifying the premium over that transaction. Despite this, he has lowered his EBITDA forecasts for the coming years and believes that the current all-cash offer sufficiently captures the value of US Silica Holdings, leading to a reduced target price and the Hold rating.
According to TipRanks, Gengaro is a 4-star analyst with an average return of 3.7% and a 41.80% success rate. Gengaro covers the Energy sector, focusing on stocks such as Core Laboratories, US Silica Holdings, and Baker Hughes Company.
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US Silica Holdings (SLCA) Company Description:
U.S. Silica Holdings, Inc. engages in the provision of commercial silica products. It operates through Oil and Gas Proppants; and Industrial and Specialty Products segments. The Oil and Gas Proppants segment focuses in delivering fracturing sand, which is pumped down oil and natural gas wells to prop open rock fissures and increase the flow rate of natural gas and oil from the wells. The Industrial and Specialty products segment consists of products and materials used in a variety of industries including, container glass, fiberglass, specialty glass, flat glass, building products, fillers and extenders, foundry products, chemicals, recreation products, and filtration products. The company was founded on November 14, 2008 and is headquartered in Katy, TX.
