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Weatherford: Downgraded to Unattractive*

January 31, 2014

Weatherford (Downgrade from Attractive to Unattractive*) lowered its Q4 EPS guidance to USD 0.05-0.08 (consensus USD 0.25) and for 2014 to USD 1.10-1.20 (consensus: USD1.21) and announced a workforce reduction of around 11% (7’000 jobs), which should result in cost savings of USD 500m per year.

Main reasons for the profit warning are lower activities in South America, interruptions in production in Near East as well as bad weather conditions in the North Sea and a clearly higher tax rate. After the good share price performance last year the valuation on a P/E and EV/EBITDA basis is fair. Despite the cost reduction plans, we currently do not see enough margin improvements to justify a higher valuation and therefore downgrade the stock.

 

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