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Dawson Geophysical Well Positioned For Oil Price Recovery; Raymond James Upgrades To Strong Buy

Dawson Geophysical Well Positioned For Oil Price Recovery; Raymond James Upgrades To Strong Buy
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Dawson Geophysical Co (NASDAQ: DWSN) has significant leverage to the commodity up-cycle. Raymond James’ J. Marshall Adkins upgraded the rating for the company from Market Perform to Strong Buy, with a price target of $8. The analyst noted that Dawson Geophysical’s current valuation is compelling and its balance sheet robust.

Mentioning that Dawson Geophysical had leverage to improving US oilfield activity, Adkins wrote, “Given the company’s strong balance sheet and the carnage amongst competitors, the company should be able to gain share and pricing in the up-cycle.”

Strong EBITDA And FCF Expected

Although the company’s active crew count, revenues and margins had been adversely impacted by falling oil prices, an expected recovery in seismic activity in 2017/18 should change that. Adkins expects the company to generate an EBITDA of $42 million in 2018.

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Reduced competition, a result of the downturn, leaves Dawson Geophysical much better positioned in 2018. Although Dawson Geophysical failed to generate meaningful free cash flows in the last up-cycle owing to equipment upgrades, the company is likely to do so in the current one, given its top of the line equipment, which would keep its capex needs low, Adkins noted.

Despite solid free cash flows, the stock is trading at merely 50 percent of book value. “Given the environment, and attractive entry point, we are increasing our rating to Strong Buy,” the analyst wrote.

Latest Ratings for DWSN

May 2016Raymond JamesUpgradesMarket PerformStrong Buy
Aug 2015Raymond JamesDowngradesOutperformMarket Perform
Mar 2015WunderlichMaintainsHold

View More Analyst Ratings for DWSN
View the Latest Analyst Ratings

Posted-In: J. Marshall Adkins Raymond JamesAnalyst Color Long Ideas Upgrades Analyst Ratings Trading Ideas Best of Benzinga


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