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Why FTS International Stock Sank Today

By Matthew DiLallo – Updated Dec 19, 2018 at 10:45AM

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An analyst downgrade is weighing on the oil-field services company.

What happened

Shares of FTS International (FTSI) had tumbled nearly 15% by 3 p.m. EST on Wednesday after an analyst downgraded the oil-field services company's stock.

So what

Credit Suisse cut its rating on FTS International from outperform to neutral while slashing its price target from $15 all the way down to $8 per share. Driving the downgrade was the bank's tepid view on the oil market due to the recent plunge in oil prices. Because of that, it now sees the U.S. rig count falling 5% in the coming year, which would cause a 5% drop in well-completion activity and a 3% decline in the amount of pressure pumping horsepower needed. Because FTS is one of the largest well-completion companies in North America, the anticipated decline in well completions and pressure pumping would have a noticeable impact on its financial results. 

Barrels of oil rising in height with an upward pointing red arrow in the background.

Image source: Getty Images.

FTS International's operations were already under pressure in recent quarters. Revenue tumbled from $493.3 million in the second quarter to $334.4 million during the third quarter, while its earnings plummeted more than 50%. That's after its customers exhausted their budgets earlier than expected. While the company anticipated that activity levels would bounce back in 2019, that might not happen given the recent plunge in crude prices.

Now what

Crude oil has fallen from the mid-$70s to the mid-$40s over the past couple of months. Because of that, oil companies likely won't ramp up their activity until prices improve, which will keep the pressure on FTS International's financial results and stock price.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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