Stifel cuts Patterson-UTI Energy stock target, maintains buy on growth outlook By Investing.com

On Tuesday, Stifel, a financial services company, adjusted its stock price target for Patterson-UTI Energy (NASDAQ:), a provider of onshore drilling and hydraulic fracturing services. The firm reduced the price target to $16.00 from the previous $19.00 but upheld a Buy rating on the stock.

The adjustment reflects Stifel’s anticipation of increased drilling and completion activities in the United States during 2024, driven by a robust price environment. This outlook comes after a period of reduced activity in the latter half of 2023. The firm’s confidence in the company also stems from the expected realization of at least $200 million in annual synergies due to Patterson-UTI’s merger with NexTier.

Stifel also cited Patterson-UTI’s continued capital discipline and strong projections for free cash flow (FCF) as reasons for their positive stance. The firm anticipates that at least 50% of the company’s FCF will be returned to shareholders through dividends and buybacks, enhancing shareholder value.

Additionally, Stifel pointed out the strategic position of Patterson-UTI as the largest U.S. leveraged drilling and completion company. This stature could make it a preferred choice for investors looking to gain exposure to U.S. shale activity. The company’s comprehensive services in the energy sector, coupled with the strategic benefits of its recent merger, positions it favorably in the eyes of the firm.

In other recent news, Patterson-UTI Energy has reported steady drilling activity for May 2024, maintaining an average of 114 drilling rigs operating throughout the month. The company also met its first-quarter earnings guidance across all operating segments, generating $139 million in free cash flow. Patterson-UTI Energy plans to return at least $400 million to shareholders in 2024, including approximately $130 million in dividends and at least $270 million in buybacks.

Analysts have been monitoring the company’s performance, with Evercore ISI lowering its price target for Patterson-UTI Energy, yet maintaining an Outperform rating. JPMorgan has retained a Neutral stance, while Piper Sandler reduced its price target due to lowered expectations for the company’s 2025 earnings.

These recent developments highlight Patterson-UTI Energy’s commitment to returning substantial cash to shareholders, despite fluctuations in the company’s performance and the broader economic trends within the oil and industry.

InvestingPro Insights

In light of Stifel’s recent appraisal of Patterson-UTI Energy, current InvestingPro data provides a deeper understanding of the company’s financial health and market performance. As of the last twelve months leading up to Q1 2024, Patterson-UTI boasts a market capitalization of approximately $4.21 billion, with a notable revenue growth of 66.04%, signaling a strong upward trajectory in earnings. Furthermore, the company’s gross profit margin stands at a healthy 30.61%, underlining its efficiency in maintaining profitability amidst operational costs.

InvestingPro Tips highlight that Patterson-UTI has a track record of maintaining dividend payments for 21 consecutive years, which aligns with Stifel’s anticipation of shareholder returns through dividends. Moreover, the company’s liquid assets surpassing short-term obligations is a reassuring sign of financial stability. For those interested in further insights, there are additional InvestingPro Tips available, which can be accessed with a subscription. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering more detailed analytics and investment tips.

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