Barclays expressed the view that the previous concerns on Forum Energy Technologies Inc FET shares have vanished as the company is on the recovery path. As a result, analysts David Anderson and William Thomson gained more confidence on the company's EPS power following a meeting with the CEO Cris Gaut.
The brokerage upgraded shares from Equal-weight to an Overweight rating and boosted the price target from $19 to $23.
The analyst believes the company has come a long way after its IPO in 2012 to reach a position of diverse portfolio in the oilfield products sector. The advantage is that it could achieve revenue growth through the drilled footage rather than the number of rig count.
"Until now, we had viewed the Street's almost myopic focus on frac fluid end restocking as a risk given Flow Equipment (fluid ends, treating iron, frac manifolds) was only 11% of 2014-15 revenue and that a lower normalized US land rig count would constrain Drilling Tech revenue (34% of 2014-15 revenue)," analysts viewed in their note.
The brokerage pointed out three thematic checks to reach its conclusion.
- "Exposure to early-cycle NAM consumer restocking
- Capital-light manufacturing that has generated FCF throughout the cycle, and
- Strong balance sheet to pursue accretive bolt-on M&A"
The analyst isn't worried about the stock's year-to-date drop of close to 50 percent compared to 2 percent fall in PHLX Oil Service Sector OSX.
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