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Weatherford - My $4 Price Target Explained PDF Print E-mail

With nearly $3 billion in quarterly revenue Weatherford International (NYSE:WFT) is one of the world's largest oil services firms. Many consider the company to be in the same class as leading equipment providers like Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI). To the extent the merger between Baker Hughes and Halliburton results in a client attrition, Weatherford could be a potential beneficiary of that. The company is global - over 60% of its revenue comes from abroad

  • The company has an enterprise value of $15.5 billion, equating to 10.3x my 2015E EBITDA of $1.5 billion;
  • EBITDA multiples of 5.0x - 7.0x are appropriate for cyclical businesses of this nature;
  • At the top end of my valuation WFT is worth $4;
  • At $10.64 WFT is overvalued by 62%. Get Out.  Read more:  
 
Halliburton Gives Weatherford The "Icahn / TWA Treatment" PDF Print E-mail

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Competitors punished Icahn / TWA in '92
An idiom in deal circles is that "You never lever up a cyclical business." Too much leverage befell Trans World Airlines ("TWA") after Carl Icahn took it private via an LBO in the late '80s. TWA's debt load left it unable to weather the recession brought on by the Gulf War; the airline entered bankruptcy protection in 1992. In May 1992 competitors engaged in the Icahn / TWA Treatment - slashing air fares when the cash-strapped, heavily-indebted TWA could ill-afford to compete on price. Similar to the airline industry in the early '90s, the oil services industry is cyclical and suffering from declining pricing power. Big oil has cut capex amid lower oil prices. North American land drillers have halved the rig count since Q3 2014, and cut high-margin well site services.

Halliburton is making price concessions on pressure pumping and well stimulation services in the region. Heavily-indebted Weatherford and undercapitalized Oil States International can ill-afford to compete on price. Read more

 
Cornel West Anoints "Shock Exchange" As A Classic PDF Print E-mail

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De facto co-sign
These days everyone is quick to anoint this author a "legend" or that book an "instant classic." Like Nas' Illmatic, most classics are usually hiding in plain sight. In Dr. Cornell West's synopsis of Ta-Nehisi Coates' Between The World In Me, which Publishers Weekly declared would be hailed "A classic of our time," he had this to say:

He indeed tells crucial truths about the vicious legacy of white supremacy as plunder on a visceral level, yet he fails to focus on our collective fightback, social movements or political hope. Even his fine essays downplay people's insurgency and resistance. The full truth of white supremacy must include our historic struggles against it. His critical comments in his essays about the respectability politics or paternalistic speeches of the black president in power (absent in his book) do not constitute a critique of the presidency.

If that is West's criteria, then he just accidentally annointed Shock Exchange: How Inner-City Kids From Brooklyn Predicted The Great Recession And The Pain Ahead as a classic.

 
Civeo's Free Fall Continues PDF Print E-mail
Civeo (NYSE:CVEO) reported Q2 earnings last week. The company reported revenue of $143 million while analysts were expecting revenue of $137 million. CVEO is up nearly 8% to $2 on the revenue beat. Overall, revenue declined 16% sequentially and 37% Y/Y ... Though total revenue declined 16% sequentially, the devil is in the details. Revenue from Canada and Australia fell 23% and 16%, respectively. Meanwhile, U.S. revenue was up 21%. The decline in oil prices has hurt Canadian oil sands operators, which in turn has hurt Civeo. Read more:
 
Oil States International - Short Interest Quadruples In One Year PDF Print E-mail

Oil States International (NYSE:OIS) participates in the oil services space which is in retrenchment mode. Though Oil States has $1.6 billion in trailing 12 months revenue, competitors like Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB) are 10 times bigger. The company may not have the size to compete with industry heavyweights in an oil industry downturn, and shorts are starting to pounce.  Read more:

 
Samsung's Mobile Decline Is Off The Hook PDF Print E-mail
Samsung (OTC:SSNLF) has been heavily promoting its semiconductor division in order to offset declining growth from its mobile operations. The company reported Q2 financial results on Wednesday and the mobile unit continues to disappoint. Total revenue was down 7% Y/Y while operating income was off 4% ... Operating profits from Samsung's mobile division declined by double-digits again this quarter. The rub is that mobile represents 40% of total operating profit, and growth in semiconductors was not robust enough to offset it. Until revenue and operating profit stabilize, investors should avoid the stock. Read more :
 
Open Letter To Library Of Virgina PDF Print E-mail

After writing Shock Exchange: How Inner-City Kids From Brooklyn Predicted The Great Recession And The Pain Ahead, I spent the first six months getting it reviewed and another nine months trying to get it into bookstores and libraries. I chose the independent route so I had to market the book myself. Secondly, it is my first book and I had no contacts or book marketing experience. That said, I was unaware of the Library of Virginia Book Awards. What I did accomplish, however, was write the best book on Wall Street in the past 20 years and as far as economics is concerned, maybe the most important book since the Great Depression.

 
Weatherford - Short Interest Rises To 23 Million Shares PDF Print E-mail

Weatherford International (NYSE:WFT) is considered a heavyweight in the oil services space. While market leaders have the capital and the balance sheets to weather the downturn in the oil industry, Weatherford may not. And shorts are beginning to pounce. Short interest peaked at 24 million shares in mid-March and fell off to 15 million at the end of April. Though the company's Q1 revenue and EBITDA fell Q/Q 25% and 45%, respectively, WFT still rose 4%. That may have caused shorts to close some of their positions. At mid-July short interest rose to 23 million shares. The impact the oil industry contraction has had on oil services firms is no secret. However, some of the bearishness pursuant to Weatherford may be company-specific. Read more

 
Stick A Fork In Dril-Quip PDF Print E-mail
Dril-Quip (NYSE:DRQ) reported quarterly earnings on Thursday morning. The company generated revenue of $215 million and eps of $1.01. Analysts were expecting revenue of $224.9 million and eps of $1.21. EPS was negatively impacted by an $8.8 million foreign exchange loss, or $0.23 per share. After the miss on revenue and eps DRQ fell over 2% to $62 ... With over $1 billion in working capital and no debt, Dril-Quip is well capitalized. However, it lacks scale and diversification. It is also heavily exposed to the subsea drilling segment which is expected enter a protracted decline. Stick a fork in DRQ. Read More:
 
Oil States International - 20% Revenue Declines Won't Abate PDF Print E-mail
Oil States International (NYSE:OIS) reported Q2 results on Tuesday, July 28, after-hours. The company reported revenue of $269 million and EPS of $0.15 ex-items. Revenue was shy of the $277 million analysts expected, but the company beat on earnings. Oil States' top line fell 20% sequentially and 41% year over year. Expectations were low heading into earnings after the company warned on revenue a few weeks ago. The stock rallied in late-day trading by nearly 5% to $31.55 ... I expect the free fall in Well Site Services and declining EBITDA margins to continue throughout the rest of the year. By that time its limited working capital might have become a major problem. Read more :
 
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