UPDATE: Guggenheim Downgrades Weatherford International to Neutral
Guggenheim downgrades Weatherford International (NYSE: WFT) to Neutral from Buy due to intensifying pressures in the US frac market. Price target of $20 is lowered to $17.
Guggenheim notes, "The consensus bull case for WFT is largely based on the perception that its U.S. operations are more driven by artificial lift than fracking, and that it is more leveraged to international markets than either BHI or HAL. However, we estimate that WFT's frac business contributed 55% of the company's overall growth in operating income between 2009 and 2011, implying that the earnings risk associated with the loss of pricing power in the frac market is greater than many investors believe. Moreover, WFT plans to grow the frac fleet by more than 15% this year, which should further pressure margins through the addition of fixed costs."
WFT closed at $15.93 a share on Tuesday.
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