Patterson-UTI Energy raised to Buy, Cactus cut to Sell equivalent at BofA
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Patterson-UTI Energy (NASDAQ:PTEN) +1.5% in Monday's trading as Bank of America upgraded the oilfield services company to Buy from Neutral with a $16 price target, while Cactus (NYSE:WHD) -1.6% as BofA downgraded the stock to Underperform with a $47 PT.
BofA's Saurabh Pant sees Patterson-UTI (PTEN) trading at an attractive estimated 2024 free cash flow yield of 14% and estimated 2025 FCF yield of 18%, and notes the company has promised to return at least 50% of free cash flow to shareholders via dividends and buybacks.
Pant noted Patterson-UTI (PTEN) has completed two large and transformative acquisitions - NexTier and Ulterra - which raised its market cap to $5.7B from $3.7B at year-end 2022; the NexTier transaction is expected to contribute $200M in annual synergies over 18 months, primarily reflecting an improvement in pressure pumping's lagging profitability.
On the flip side, Pant likes Cactus' (WHD) Pressure Control business and growth opportunity in Spoolables, but he downgraded the stock in a struggle to find enough free cash flow compared to peers.
BofA's downgrade of Cactus (WHD) also reflects the stock's relatively strong valuation compared to oilfield services peers (OIH).
The bank also slightly raised stock price targets for Buy-rated Baker Hughes (BKR), ChampionX (CHX), Halliburton (HAL), Helmerich & Payne (HP), TechnipFMC (FTI), Chart Industries (GTLS), NOV (NOV), and SLB (SLB).
Along with Cactus (WHD), Bank of America rates Core Laboratories (CLB) and Transocean (RIG) at Underperform.

More on Cactus and Patterson-UTI Energy

Cactus: Concerns Regarding Future U.S. Oil Rig Demand
Cactus Is Sufficiently Balanced To Absorb The Topline And Margin Pressure
Patterson-UTI Energy: Dividends And Buybacks Well Supported, ~85% NOPAT Distributable