Canaccord stays at 'buy' on Hunting but questions strategic direction
Analysts at Canaccord Genuity stuck with a 'buy' recommendation on shares of energy services provider Hunting, pointing out its solid balance sheet.
"Hunting has a long track record as an astute trader of businesses, and a similarly impressive record in engineering in multiple sectors," they said.
But the third major downturn since 2009 was likely to push cash-flow to break-even and push its margins on an earnings before an interest and tax basis negative in the backhalf of 2020.
Thus, they slashed their target price from 475.0p to 275.0p, while also airing their doubts about the company's chosen path.
"Are downhole tools and OCTG (Oil Country Tubular Goods) really the most attractive things for the group to be doing, and in the way they are being done?"
On the flipside, the group remained in a "characteristically" solid financial position, had "painstakingly" built up its balance sheet since buying Titan in 2011 and would probably finish 2020 with a "comfortable" net cash position.
And at their target price, the stock would be changing hands on 13.0-9.0 times' their estimated price-to-earnings multiple for 2022-23, versus a long-run average of roughly 12.0.
"We therefore remain BUYers, but we are increasingly convinced there are better paths for Hunting to follow."