Please ensure Javascript is enabled for purposes of website accessibility

Shares of Weatherford International Climbed 21% in March After Getting Goldman Sachs' Blessing

By Tyler Crowe - Apr 6, 2016 at 10:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Weatherford has finally made the steep cuts to its cost structure that it so desperately needed, and analysts are starting to notice.

Image Source: Weatherford International investor presentation

What: After starting the month off on the wrong foot with a secondary share issuance, shares of Weatherford International (NYSE: WFT) ended up 21.5% in March after favorable remarks from several analysts including Goldman Sachs.

So what: One of the largest concerns investors have had with Weatherford is that it's overburdened with debt and hasn't been able to generate adequate cash flows for years now. The company has continually tried restructuring effort after restructuring effort to get things right, but the company consistently found itself with a debt load much higher than its peers and lower returns on equity. That isn't exactly a recipe for greatness in investors' eyes.

WFT Debt to Capital (Annual) Chart

WFT Debt to Capital (Annual) data by YCharts

This most recent decline in oil prices has forced the company's hand to make some drastic cuts to its cost basis and focus on cash generation. And its those efforts, combined with the recent share issuance that raised about $630 million, that should help put it on more solid footing. That cost cutting is the reason that analysts at both Goldman Sachs and JPMorgan have said this past month that they view Weatherford's stock more favorably. 

Now what: Certainly the amount of cost cutting that has happened at Weatherford is showing up in the company's earnings. Last year, the company was able to generate free cash flow for the first time since 2010, and its debt situation has started to improve as its total debt outstanding has declined by $2.3 billion since the beginning of 2014. Weatherford still has a long, long way to go before it can be considered an investment on par with its larger peers in the oil service industry, but at least the company is on the right track and investors are starting to take notice.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Schlumberger Limited Stock Quote
Schlumberger Limited
$41.12 (0.66%) $0.27
Halliburton Company Stock Quote
Halliburton Company
$36.70 (1.77%) $0.64
Baker Hughes Incorporated Stock Quote
Baker Hughes Incorporated

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.