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Is Weatherford International’s Share Price Weak?

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Weatherford International versus peers and industry

Weatherford International (WFT) is an oilfield equipment and services (or OFS) company with operations in more than 100 countries. On May 13, 2016, Weatherford International was trading at $5.64. This was down by 35% year-to-date.

The VanEck Vectors Oil Services ETF (OIH), an ETF tracking index of 25 OFS companies, has remained nearly unchanged since the beginning of 2016. Precision Drilling Corporation (PDS), WFT’s smaller market cap peer, has increased by 3% during the same period. The entire OFS industry has been negatively affected by the energy price crash in June 2014. However, crude oil prices have recovered by 26% year-to-date.

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What does WFT’s share price movement tell us?

Weatherford International’s share price has been trending down since May 2015. WFT’s quarterly revenues and earnings in the past four quarters persistently stayed weak, due largely to the energy price depression and weak demand for OFS products and services.

WFT’s cash flows, which stayed steady until 4Q15, also turned negative in 1Q16. WFT makes up ~3.2% of the iShares US Oil Equipment & Services ETF (IEZ).

Weatherford International’s moving averages

On May 13, 2016, Weatherford International’s (WFT) share price was at a 21.6% discount to its 50-day moving average (or DMA). It is trading 33% below its 200-day moving average.

Moving averages exhibits a smoother trend following the stock’s price movement. A 50 DMA is a short-term moving average while a 200 DMA shows a long-term trend. WFT’s short-run moving average has been below its long-run moving average from June 2015 to date. WFT’s share price also stayed below its long-run moving average throughout the past year. This indicates bearishness in WFT’s share price.

In this series, we will analyze why Weatherford International’s credit rating profile was downgraded. We will also discuss the growth in its top line and bottom line, its balance sheet, and its valuation multiples. We will start with its management comments in the next part.

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