On Friday, Citi reaffirmed their optimistic stance on TechnipFMC (NYSE:), a global oil and gas services company, maintaining a Buy rating and a price target of $34.00.
The firm's confidence is based on TechnipFMC's expectations to reach nearly $10 billion in subsea inbound orders for the current year. Citi supports this outlook with a forecast of $10.2 billion for fiscal year 2024.
Despite this positive projection, Citi has adjusted its third-quarter subsea inbound forecast for TechnipFMC down to $1.8 billion from the previous $2.4 billion. This revision falls short of the Factset consensus, which estimated $2.6 billion. The reduction is attributed to a lower number of announced awards during the quarter.
TechnipFMC plans to provide updated revenue and margin guidance for fiscal year 2025 during their third-quarter earnings call. Citi's current estimates for the company in FY25 include revenues of $8.65 billion, which surpasses the consensus of $8.46 billion, and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) matching the consensus at $1.6 billion.
While most of TechnipFMC's projects have a breakeven point at approximately $50 per barrel of oil or less, the company acknowledges the possibility of a demand impact if oil prices were to fall below $60.
"We maintain our FY25 EBITDA forecast at $1.7bn, above consensus at $1.65bn, and our FY25 FCF forecast at $865mm, slightly below consensus at ~$880mm," said Citi.
In other recent news, JPMorgan reiterated its Overweight rating on TechnipFMC, emphasizing its growth trajectory. The firm's projections for 2025 Subsea revenue and EBITDA margins align closely with market expectations. TechnipFMC has also secured two substantial contracts from Petrobras for offshore work in Brazil, further bolstering its financial position.
Benchmark, likewise, upgraded the price target for TechnipFMC from $30.00 to $35.00, also maintaining a Buy rating.
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Analysis:
In summary, Citi's optimistic outlook on TechnipFMC is supported by the company's expected growth in subsea inbound orders. Despite a slight adjustment in the third-quarter forecast, TechnipFMC's long-term projections for revenue and EBITDA remain strong. JPMorgan and Benchmark also express confidence in the company's growth trajectory, with recent contract wins further enhancing its financial position.
For investors, this news suggests that TechnipFMC may present a promising opportunity for growth and profitability in the oil and gas services sector. Keeping an eye on oil prices and demand trends will be crucial factors to monitor, as they could impact the company's performance in the future.