ATB Capital Markets analyst Waqar Syed and Tim Monachello are bearish on U.S.-based energy services companies in the near-term, expecting “weak” second-quarter guidance from land drilling contractors and “sub-optimally positioned” pumpers.
“While cold weather in the Bakken, and GOM field maintenance may have contributed to the decline, the magnitude of the drop and the geographical diversity of the drop indicates that declines in D&C activity in 2023 have started to have an impact on oil production,” the analyst said. “This view is also bolstered by the March 2024 Dallas Fed Survey, where E&P oil production index turned negative for the first time since Q3/20.
“SEA is a proven EV powertrain technology company focused on commercial vehicles,” he said. “The company has deals with Mack and Hino which could reach $200-million in revenue in ‘24 and more than $300-million in ‘25. SEA’s patented SEA-Drive technology is 25-35 per cent more efficient than competitors according to independent studies.
“Our favorable view of GFL Environmental Inc. reflects: 1) the attractive characteristics of the North American Waste industry, where GFL is the 4th largest player; 2) GFL’s positioning as a leading consolidator and the company’s relatively smaller scale , which makes M&A a more meaningful growth driver for GFL; 3) our outlook for leverage reduction over our forecast horizon; and, 4) potential upside to GFL’s valuation as it executes on the above-noted opportunities,” he added.
“GFL is trading at 11.6 times our 2024 EBITDA vs. an average of 15.9 times for the other Majors,” he said. “We see potential for this discount to close over time as GFL delivers on its organic/inorganic initiatives and as the company reduces its leverage over the near-term . Our US$46 PT is based on 13.0 times our 2025 EBITDA.