Raymond James Downgrades ProPetro Holding, Says Stock Prices In Outperformance

ProPetro Holding Corp’s PUMP fourth quarter reflected its consistent frac fleet utilization and superior performance to peers, according to Raymond James. 

While the company is likely to generate industry-leading profitability in 2019, this is already priced into its stock, the sell-side firm said in a Thursday downgrade note. 

The Analyst

Raymond James’ Praveen Narra downgraded ProPetro Holding from Strong Buy to Outperform while maintaining a $25 price target.

The Thesis

ProPetro has been reporting market-leading results, which underlines its differentiation in the Permian as well as the resilience of its partnership business model, Narra said in the downgrade note. 

ProPetro outperformed peers even as the overall pressure pumping industry faltered in late 2018, the analyst said. 

With an oil price recovery expected in 2019, there could be some normalization of ProPetro's earnings power versus its peers, he said. 

In the fourth quarter, ProPetro achieved annualized EBITDA per hydraulic horsepower of $425 versus the peer group’s annualized $220 per HHP. This represented the highest outperformance in the history of these companies being public. Narra said. 

This discrepancy will contract, with ProPetro’s earnings outperforming the peer group by around $130 per horsepower in 2019, the analyst said. 

ProPetro’s share price already incorporates a substantial premium, according to Raymond James.

Price Action

ProPetro shares were down 0.41 percent at $21.79 at the time of publication Thursday. 

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