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The Word on the Street: Analyst Recommendations for Mid-Cap OFS Stocks

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The analysts’ favorite

Approximately 69% of analysts tracking Weatherford International (WFT) have recommended a “buy” or equivalent. Approximately 23% recommend a “hold,” and the rest recommended a “sell.” The analyst consensus target price for WFT is $7.9. WFT is currently trading near $5.9, which implies a ~33% return over the next 12 months.

Weatherford International is expected to generate positive free cash flow in 2016. It plans to lower net debt by 7% by the end of 2016. In May, WFT settled its contracts related to Zubair field in Iraq, which had run into legal trouble. Despite challenges in the energy sector, Weatherford International remains one of the top analyst picks in the OFS industry.

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Core Laboratories and Dril-Quip

Approximately 50% of analysts tracking Core Laboratories (CLB) have recommended a “buy” or equivalent. Approximately 39% recommend a “hold,” and the rest recommend a “sell.” The analyst consensus target price for CLB is ~$126. CLB is currently trading at $121, which implies a 3.7% return over the next 12 months. Notably, CLB makes up 4.4% of the VanEck Vectors Oil Services ETF (OIH).

Only ~31% of the analysts tracking Dril-Quip (DRQ) have recommended a “buy” or equivalent. Approximately 62% recommend a “hold,” and the rest have recommended a “sell.” The analyst consensus target price for DRQ is ~$60. DRQ is currently trading near $60, which implies a return of nearly zero over the next 12 months.

Why analysts are skeptical about RPC, Inc.

Approximately ~43% of analysts tracking RPC, Inc. (RES) have recommended a “buy” or equivalent. Approximately 43% recommend a “hold,” while the rest recommended a “sell.” Analyst consensus target price for RES is near $14.5. RES is currently trading near $15, which implies a -3% return over the next 12 months.

In its 1Q16 press release and conference call, RPC, Inc. expressed concerns about further energy price declines in North America, operating losses, and negative cash flow generation for the upstream producers. RPC, Inc. expects to cut its capital expenditure by a further 70% in 2016 over 2015. These factors probably explain why analysts have such low ratings for RES.

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