A Reality Check For Forum Energy Tech; Credit Suisse Cuts To Neutral

Analysts at Credit Suisse no longer hold a bullish view on Forum Energy Technologies Inc FET as there are "more questions than answers." The firm's Jacob Lundberg downgraded Forum Energy's stock rating from Outperform to Neutral with a price target slashed from $23 to $12.

During Forum Energy's second-quarter 2016 conference call, the company said it could achieve "as much as 50 percent" incremental margins improvements, Lundberg noted. But fast forward to today, and the company has "not come close" to achieving its pledge. In fact, the company's margin profile has also "significantly lagged" the improvements seen at some of its peers.

Investors are now faced with "more questions than answers" and even a conversation with Forum Energy's management team didn't ease the analyst's concerns. The company attempted to explain that the recovery hasn't been as broad-based as expected although this answer doesn't explain why incremental margins in Completions hit 37 percent in the third quarter of 2016 and then dipped to 27 percent during the first half of 2017.

"We lack properly granular financial information for FET and its peers to precisely identify the source of underperformance and management commentary does not square that circle for us," the analyst added.

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