On Thursday, Goldman Sachs (NYSE:GS) revised its stance on Patterson-UTI Energy (NASDAQ:PTEN), elevating the stock to a Buy rating from a previous Neutral position. The firm set a new price target of $10.00 for the company's shares, which currently trade at $7.62, near their 52-week low. According to InvestingPro analysis, the stock appears undervalued, with analyst targets ranging from $10 to $14.
The upgrade comes as part of a broader coverage transfer of several small to mid-cap oil service companies from analyst Neil Mehta to Ati Modak. Goldman Sachs has introduced a new framework for evaluating traditional oilfield services stocks, acknowledging the sector's diminished appeal in 2025. Patterson-UTI stands out with its 21-year track record of consistent dividend payments and current 4.1% yield.
InvestingPro subscribers can access 8 additional key insights about the company's financial health and growth prospects. The firm's selection criteria now emphasize companies that can demonstrate resilient revenues through technological advantages or contractual structures, as well as those showing idiosyncratic growth that outperforms their peers.
For international market exposure, Goldman Sachs prefers Schlumberger (NYSE:NYSE:SLB), with a Buy rating, citing an approximate 6% total return from shareholder rewards and revisions. Conversely, Weatherford International (NASDAQ:WFRD) has been downgraded to Neutral following its recent outperformance and an estimated total return of around 4%.
Management at Patterson-UTI has been actively buying back shares, demonstrating confidence in the company's future despite its beta of 2.11 indicating higher market volatility.
In the North American market, Patterson-UTI Energy's upgrade reflects an anticipated total return of approximately 11%, which is significantly higher than the North American average of about 7%. Goldman Sachs also draws attention to Halliburton (NYSE:NYSE:HAL), which holds a Buy rating and is expected to offer around 8% in combined dividends, buybacks, and revision potential. The firm views Halliburton as a high-quality investment, especially considering the potential uptick in gas activity in the second half of 2025.
However, Goldman Sachs maintains Sell ratings on National Oilwell Varco (NYSE:NYSE:NOV) and Helmerich & Payne (NYSE:HP (NYSE:HPQ)), as these companies are projected to have weaker returns and revisions compared to their competitors.
In other recent news, Patterson-UTI Energy Inc. has reported steady drilling activity with an average of 105 drilling rigs operating in the United States for November 2024.
Despite facing a challenging third quarter in 2024 with a net loss of $979 million, primarily due to an $885 million goodwill impairment related to the NexTier merger, the company maintained a steady revenue of $1,357 million and generated substantial free cash flow. The adjusted net income was reported at $2 million, with adjusted EBITDA reaching $275 million.
The company's fourth quarter adjusted EBITDA guidance of approximately $225 million, as noted by CapitalOne, reflects a cautious outlook. Patterson-UTI Energy's Completion Services segment aims to achieve margins similar to those seen in mid-2024. The company also anticipates a stable rig count for 2025, despite expecting slightly lower activity levels compared to 2024.
These recent developments underscore Patterson-UTI's focus on leveraging its integrated services model and strong cash flow to enhance shareholder value amid market challenges. The company has maintained dividend payments for 21 consecutive years, currently offering a 3.9% dividend yield. Patterson-UTI Energy does not undertake any obligation to update forward-looking statements publicly.
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