On Monday, JPMorgan adjusted its outlook for Liberty Oilfield Services (NYSE:LBRT), reducing the price target to $21.00 from the previous $25.00 while maintaining a Neutral rating. The reassessment comes amid industry changes and market conditions impacting the company's operations.
The industrialization of U.S. shale activities has prompted a shift towards higher-grade frac equipment, aligning with Liberty Oilfield's strategy and contributing to its year-to-date (YTD) outperformance against North American (NAM) peers. Liberty Oilfield's stock has seen a 25% increase compared to its NAM counterparts. This performance is partly due to the company's investment in digital technologies and vertical integration at the wellsite, including its LPI initiative, which has bolstered its market position even as the broader market faces challenges.
Despite market share gains in a weakening market, Liberty Oilfield is feeling the impact of reduced North American drilling and completion (D&C) activity. This has led to increased downtime and pressure on pricing. JPMorgan projects a 5% sequential decline in third-quarter revenue for Liberty Oilfield, driven by a 3% decrease in pumping hours and a slight drop in pricing. Consequently, the firm has lowered its third-quarter EBITDA forecast to $255 million from $272 million, which is also below the consensus estimate of $269 million.
For the fourth quarter of 2024, JPMorgan has set the EBITDA estimate for Liberty Oilfield at $227 million, which is 5% lower than the Street's expectation of $239 million. The company is currently operating seven digital fleets and plans to expand to ten fleets going into 2025. Liberty Oilfield remains committed to enhancing its LPI offering, which is under development to provide compressed natural gas (CNG) for frac fleets and is expected to eventually offer mobile power generation for a variety of customers.
In other recent news, Liberty Oilfield Services reported a robust second quarter in 2024. The company's earnings per share matched analyst expectations at $0.61, while its revenue of $1.16 billion slightly fell short of the consensus estimate of $1.17 billion. Despite the minor shortfall, the company achieved an 8% sequential increase in revenue and a 12% sequential increase in adjusted EBITDA, totaling $273 million.
TD Cowen recently adjusted its outlook on Liberty Oilfield Services, reducing the price target to $20.00 from the previous figure of $21.00, while maintaining a Hold rating. In contrast, both Stifel and RBC Capital Markets kept their positive ratings, with Stifel raising its price target to $27 due to the company's robust performance.
Liberty Oilfield Services' focus on capital-efficient, low-emissions natural gas-fueled technologies led to the highest diesel displacement in its history, with dual fuel gas substitution levels increasing by over 25% in the past year.
InvestingPro Insights
Liberty Oilfield Services' recent market performance aligns with several key metrics and insights from InvestingPro. The company's P/E ratio of 7.37 suggests that it's trading at a relatively low valuation compared to its earnings, which could be attractive to value investors despite JPMorgan's reduced price target.
InvestingPro Tips highlight that Liberty Oilfield Services has been profitable over the last twelve months, with analysts predicting continued profitability this year. This aligns with the company's strategic investments in digital technologies and vertical integration, which have contributed to its outperformance against peers.
However, the InvestingPro data shows a revenue decline of 7.12% over the last twelve months, which corroborates JPMorgan's concerns about reduced North American drilling and completion activity. The stock's recent 10.05% drop over the past week, as noted in another InvestingPro Tip, reflects the market's reaction to these challenges.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide further insights into Liberty Oilfield Services' financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.