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Weatherford International (NASDAQ:WFRD) +2.3% in Monday's trading as Bank of America initiated coverage with a Buy rating and $120 price target, saying the company has staged a remarkable turnaround from a Chapter 11 restructuring in 2019 and a near repeat in 2020.
Weatherford (WFRD) is now generating very strong adjusted EBITDA margin of ~23% in 2023, second only to SLB among the Big 3 diversified oilfield service providers, and its free cashflow conversion as a percentage of EBITDA is now similar to the Big 3, BofA analyst Saurabh Pant said.
New CEO Girish Saligram has refocused Weatherford (WFRD) on its core technology strength with operational rigor and financial discipline while moving ahead on customer focus and digital transformation, which have "turned [it] into a lean and highly profitable international levered diversified oilfield services company," Pant wrote.
The analyst said he sees upside from continued revenue and margin expansion, balance sheet optimization and his expectation that Weatherford (WFRD) will initiate shareholder distributions next year, and noted the coming expiration next month of nearly 7.8M warrants, worth more than 10% of the company's diluted share count, that carry a $99.96 exercise price.