4 Reasons Why TechnipFMC Was Upgraded By Goldman Sachs

TechnipFMC PLC FTI, a provider of surface equipment for onshore wells, is well-positioned to take advantage of favorable industry shifts that should result in a tripling of deepwater final investment decisions through 2019, according to Goldman Sachs.

The Analyst

Goldman Sachs' Waqar Syed upgraded TechnipFMC's stock rating from Neutral to Buy with a price target lifted from $30.50 to $39.

The Thesis

The upcoming "resurgence" of deepwater and subsea developments bodes well for TechnipFMC, and its stock should re-rate higher accordingly, Syed said in a research report. TechnipFMC's stock also happens to be the cheapest within the entire large-cap oil service universe, as it is priced at a 410-basis point discount on 2018E EV/EBITDA and 100-basis point discount to its large cap peers on 2019E EBITDA, the analyst said. (See Syed's track record here.) 

Despite trading at a discount on various multiples, the company stands out with a sustainable margin profile of around 6 percent over the past seven years, Syed said. Coupled with "very effective" risk management practices, TechnipFMC has generated consistently higher profitability profiles versus its peers, he said. 

The analyst named four reasons for Goldman Sach's bullishness on TechnipFMC:

• Expectations for inbound orders for the subsea segment are $19.2 billion, up from a prior estimate of $17.7 billion. Goldman raised its estimate for inbound orders from $16.6 billion to $25 billion.
• Many deepwater project awards are with the company's alliance partners.
• TechnipFMC has high exposure to increased U.S. shale completion activity and LNG FIDs.
• A recovery of deepwater/LNG should improve investor sentiment, as the stock has de-rated since 2014.

Price Action

Shares of TechnipFMC were trading higher by 0.59 percent at the time of publication Friday. 

Related Links:

Benzinga's Top Upgrades, Downgrades For April 12, 2018

28 Stocks Moving In Thursday's Pre-Market Session