JPMorgan adjusted its outlook for Nabors Industries Ltd (NYSE:NBR), reducing the price target on the company's shares to $75.00 from the previous $94.00, while maintaining an Underweight rating. The firm anticipates Nabors' third-quarter financial results to align with general market expectations and the company's own guidance. The projected EBITDA for the third quarter of 2024 is $220 million, slightly below the Street's estimate of $224 million.
Nabors recently disclosed at an investor conference that the number of rig suspensions in Saudi Arabia has increased to three. Although these rigs are currently operational, they are expected to go idle starting in the fourth quarter of 2024. JPMorgan forecasts an international rig count of 85 for the third quarter of 2024, with a daily margin increase of $152, hitting the lower end of Nabors' margin guidance between $16.2k and $16.3k.
In the United States, Nabors is experiencing higher rig churn, which may lead to a modest decline in rig utilization against their guidance. The count is expected to be around 67 rigs in the Lower 48 states on average for the third quarter, which is below the company's guidance and JPMorgan's previous assumption of 70 rigs. For the fourth quarter, the number is expected to rise to an average of 69 rigs. Notably, dayrates in the U.S. Land sector are at the low-to-mid $30k range, with recent fixtures trending toward the lower end.
Despite these challenges, Nabors is expected to meet its third-quarter EBITDA target of $34 million for its NDS segment, thanks to robust third-party activity. JPMorgan has revised its EBITDA estimates for Nabors for 2024 and 2025 to $882 million and $935 million, down from $893 million and $990 million, respectively. Similarly, the free cash flow forecasts for 2024 and 2025 have been lowered to $137 million and $118 million from previous estimates of $151 million and $175 million. The new December 2025 price target is based on a normalized free cash flow analysis.
In other recent news, Nabors Industries has seen major developments in its financial outlook and operations. Citi recently downgraded Nabors' stock from Buy to Neutral, citing a more conservative outlook on the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) and free cash flow (FCF) for the year 2025. Revised forecasts for Nabors indicate a 2025 EBITDA of $934 million, a 5% decrease from the consensus, and a significant reduction in the company's 2025 FCF to $90 million, over 50% below the consensus.
Additionally, Nabors reported a strong second quarter in 2024, with total adjusted EBITDA surpassing expectations. Despite a 6% decline in the US Lower 48 rig count, the company maintained robust daily margins and reported revenue growth in its international operations and other segments. The company's revenue from operations stood at $735 million, with significant growth in the International Drilling segment, Drilling Solutions, and Rig Technologies.
Nabors Industries has also made strides in sustainability and debt reduction, with net debt decreasing by almost $50 million to $2.04 billion. The company plans to deploy five additional rigs internationally throughout 2024, aiming for growth in the international market and focusing on advanced technology solutions.
InvestingPro Insights
Recent metrics and analyst insights from InvestingPro paint a detailed picture of Nabors Industries Ltd's current financial landscape. With a market capitalization of $626.58 million, Nabors is trading near its 52-week low, reflecting the stock's significant price drop over the past year of -52.61%. This aligns with JPMorgan's reduced price target and underweight rating. The company's price-to-earnings (P/E) ratio stands at a negative -3.34, indicating that the company has been unprofitable over the last twelve months, a trend that analysts expect to continue into the current year.
InvestingPro Tips highlight that Nabors' stock has been characterized by high price volatility, with the stock taking substantial hits over the last week, month, and six months. This volatility is a crucial factor for investors to consider, especially those looking for stability in their investments. Additionally, despite the company's liquidity position where liquid assets exceed short-term obligations, analysts have revised their earnings downwards for the upcoming period, signaling caution for potential investors.
For those interested in a deeper analysis, there are additional InvestingPro Tips available that provide further insights into Nabors Industries Ltd's financial health and stock performance. These tips can be found at https://www.investing.com/pro/NBR, offering valuable perspectives for informed investment decisions.
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