Credit Suisse Calls Forum Energy The 'Best-Positioned' OEM, Upgrades To Outperform

Credit Suisse analysts upgraded shares of Forum Energy Technologies Inc FET to Outperform from Neutral, calling it the best-positioned OEM. The brokerage kept a price target of $18.00 on shares.

The analysts expect NAM onshore market to witness recovery at first based on the current market conditions and then to a higher magnitude later. They pointed out that 64 percent of Forum Energy's last year revenue came from consumables/activity-based products and that NAM and onshore represented 65 percent and 77 percent respectively.

"We expect FET to be the best-performing OEM through the early days of the coming upcycle. Furthermore, we expect FET to utilize its balance sheet (net-debt-to-cap of 18% at end-1Q16) to make acquisitions into its Completions and Production and Infrastructure businesses to further leverage the portfolio to a NAM onshore recovery," the analysts said in a research note.

Credit Suisse also expect the horizontal right count to grow 33 percent year-over-year next year and pointed out that at the end of May. For the year 2018, the brokerage expects 24 percent growth from the level of 2017.

The analysts believe its price objective represented 20.3x its FCF/share projection of $1.03 for the year 2018 and discounted back to a year back from current levels at 10 percent. The analysts concluded, "We expect FET's FCF generation to more accurately capture underlying economics early in the upcycle, as the P&L captures the sale of higher-cost inventories before product manufactured in the now-leaned-out organization can show through in the P&L."