Weatherford International plc (WFRD) Bundle
Understanding Weatherford International plc (WFRD) Revenue Streams
Understanding Weatherford International plc’s Revenue Streams
Weatherford International plc generated total revenues of $1.4 billion and $4.2 billion for the three and nine months ended September 30, 2024, reflecting an increase of 7% and 11% compared to $1.3 billion and $3.8 billion in the same periods in 2023, respectively.
Breakdown of Primary Revenue Sources
The revenue streams can be categorized into products and services, with further segmentation into geographic regions:
| Revenue Source | Three Months Ended September 30, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Nine Months Ended September 30, 2024 (in millions) | Nine Months Ended September 30, 2023 (in millions) |
|---|---|---|---|---|
| North America | $266 | $269 | $785 | $820 |
| International | $1,143 | $1,044 | $3,387 | $2,953 |
| Middle East/North Africa/Asia | $542 | $471 | $1,581 | $1,268 |
| Latin America | $358 | $357 | $1,081 | $1,045 |
| Europe/Sub-Sahara Africa/Russia | $243 | $216 | $725 | $640 |
| Total Revenue | $1,409 | $1,313 | $4,172 | $3,773 |
Year-over-Year Revenue Growth Rate
In the third quarter of 2024, product revenues increased by 6% and service revenues by 8% year-over-year. For the nine months ended September 30, 2024, product revenues rose by 10% while service revenues increased by 11%.
Contribution of Different Business Segments to Overall Revenue
The contributions of various segments to the overall revenue increase for the nine months ended September 30, 2024, were:
- WCC (Well Construction and Completion): 38%
- DRE (Drilling Related Services): 33%
- PRI (Pressure Pumping and Integrated Services): 1%
The remaining increase was attributed to higher activity in integrated services and projects.
Geographic Revenue Contribution
The geographic breakdown of revenue growth for the third quarter of 2024 was as follows:
- Middle East/North Africa/Asia: 74%
- Europe/Sub-Sahara Africa/Russia: 28%
- Latin America: 1%
- North America experienced a revenue decline
In the nine months ended September 30, 2024, the contributions were:
- Middle East/North Africa/Asia: 78%
- Europe/Sub-Sahara Africa/Russia: 21%
- Latin America: 9%
- North America experienced a revenue decline
Significant Changes in Revenue Streams
For the third quarter of 2024, approximately 50% of the revenue increase was attributed to wireline activity following business acquisitions earlier in the year, while 35% stemmed from drilling-related services. Additionally, the DRE segment reported revenues of $435 million and $1,284 million for the three and nine months ended September 30, 2024, marking a 12% and 11% increase year-over-year, respectively.
A Deep Dive into Weatherford International plc (WFRD) Profitability
A Deep Dive into Weatherford International plc's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the company reported revenues of $4.172 billion, with a cost of products and services amounting to $2.7 billion. This results in a gross profit of $1.472 billion, yielding a gross profit margin of 35.3%.
Operating Profit: Operating income for the same period was $740 million, reflecting a significant increase of 23% compared to $604 million for the nine months ended September 30, 2023.
Net Profit Margin: The net income attributable to the company for the nine months ended September 30, 2024, was $394 million, leading to a net profit margin of 9.4%.
Trends in Profitability Over Time
Comparing the current year to the previous year, gross profit increased from $1.144 billion in 2023 to $1.472 billion in 2024, marking a growth of 28.7%. Operating income also rose from $604 million to $740 million, an increase of 23%. The net income improved from $277 million to $394 million, reflecting a 42.3% year-over-year growth.
Comparison of Profitability Ratios with Industry Averages
When benchmarked against industry averages, the company's gross profit margin of 35.3% exceeds the industry average of 30%, while the operating profit margin of 17.7% is also higher than the industry average of 15%. The net profit margin of 9.4% aligns closely with the industry average of 9%.
Analysis of Operational Efficiency
Operational efficiency has improved significantly, with the cost of products and services as a percentage of revenues maintaining at 65% for the nine months ended September 30, 2024, compared to 66% in the previous year. Selling, general, administrative, and research and development costs were $719 million, which is 17% of total revenues, a decrease from 18% the previous year.
| Metric | 2024 (YTD) | 2023 (YTD) | % Change |
|---|---|---|---|
| Gross Profit | $1.472 billion | $1.144 billion | +28.7% |
| Operating Income | $740 million | $604 million | +23% |
| Net Income | $394 million | $277 million | +42.3% |
| Gross Profit Margin | 35.3% | 30% | +5.3% |
| Operating Profit Margin | 17.7% | 15% | +2.7% |
| Net Profit Margin | 9.4% | 9% | +0.4% |
Overall, the company has demonstrated significant improvements in profitability metrics, exceeding industry averages and showing positive trends over time.
Debt vs. Equity: How Weatherford International plc (WFRD) Finances Its Growth
Debt vs. Equity: How Weatherford International plc Finances Its Growth
As of September 30, 2024, Weatherford International plc reported a total long-term debt of $1.6 billion. This includes:
| Debt Type | Amount (in millions) |
|---|---|
| 8.625% Senior Notes due 2030 | $1,588 |
| Finance Leases | $39 |
| Current Portion of Long-term Debt | $21 |
| Total Long-term Debt | $1,627 |
The company’s total debt has decreased from $1.715 billion at the end of 2023. The current portion of the debt was $168 million at the end of 2023, indicating a significant reduction in short-term obligations.
Debt-to-Equity Ratio
Weatherford’s debt-to-equity ratio stands at approximately 1.16 as of September 30, 2024. This ratio is calculated using total debt of $1.6 billion and total equity of approximately $1.38 billion. This ratio is relatively favorable when compared to the industry average of around 1.5, suggesting a more conservative leverage position.
Recent Debt Issuances and Credit Ratings
In terms of credit ratings, the company has seen an upgrade from Standard and Poor’s and Fitch Ratings, moving from a rating of B+ to BB- as of December 31, 2023. This reflects improved financial health and investor confidence. The company has also undertaken significant refinancing activities, including the repayment of the 6.50% Senior Secured Notes that were due in 2028, which were fully paid off on May 23, 2024.
Balancing Debt Financing and Equity Funding
Weatherford has maintained a strategic balance between debt and equity financing. For the nine months ended September 30, 2024, the company used $378 million in financing activities, primarily for debt repayments and share repurchases. The company also initiated a $500 million share repurchase program, demonstrating its commitment to enhancing shareholder value.
As of September 30, 2024, the company reported cash and cash equivalents of $920 million, providing a solid liquidity position to support ongoing operations and potential future investments.
Assessing Weatherford International plc (WFRD) Liquidity
Assessing Weatherford International plc's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 1.61, reflecting a solid liquidity position with current assets of $2.1 billion against current liabilities of $1.3 billion.
Quick Ratio: The quick ratio stood at 1.32, indicating that the company can cover its short-term obligations with its most liquid assets, excluding inventory.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was approximately $800 million as of September 30, 2024, showing an improvement compared to $700 million at December 31, 2023. This increase suggests better management of receivables and inventory levels.
Cash Flow Statements Overview
The following table summarizes cash flow provided by (used in) each type of business activity for the nine months ended September 30, 2024, compared to the same period in 2023:
| Cash Flow Activity | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Net Cash Provided by Operating Activities | $543 | $457 |
| Net Cash Used in Investing Activities | ($207) | ($158) |
| Net Cash Used in Financing Activities | ($378) | ($388) |
Operating cash flow has increased due to higher revenues and efficient collections, totaling $543 million for the nine months ended September 30, 2024, up from $457 million the previous year.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had cash and cash equivalents totaling $920 million and restricted cash of $58 million, compared to $958 million and $105 million respectively at December 31, 2023. The decrease in cash balances is attributed to strategic investments and debt repayments.
However, the company’s strong cash flow from operations and manageable debt levels position it well to meet liquidity needs. The aggregate principal amount of long-term debt as of September 30, 2024, was $1.6 billion, with significant repayments made during the year, including the full redemption of $500 million in senior secured notes.
Moreover, the company has maintained its ability to generate cash from operations despite operational challenges, evidenced by the $317 million and $459 million received from customer financing arrangements during the three and nine months ended September 30, 2024.
Is Weatherford International plc (WFRD) Overvalued or Undervalued?
Valuation Analysis
In assessing the financial health of Weatherford International plc (WFRD), a crucial aspect is determining whether the company is overvalued or undervalued based on various financial metrics and market trends.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for WFRD is 18.6, based on earnings per share (EPS) of $5.25 for the trailing twelve months. This is in comparison to the industry average P/E ratio of 15.4, indicating a potential overvaluation relative to peers.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.3, with the book value per share calculated at $8.00. The industry average P/B ratio is approximately 1.8, suggesting that the stock may be overvalued compared to the market.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 10.5, while the industry average is around 9.0. This higher ratio indicates that investors may be paying more for each unit of earnings before interest, taxes, depreciation, and amortization, further supporting the argument of potential overvaluation.
Stock Price Trends
The stock price of WFRD has seen significant fluctuations over the past 12 months:
- 12-month high: $90.00
- 12-month low: $50.00
- Current stock price: $78.00
This represents a 56% increase from the low and a 13.3% decline from the high, indicating volatility in investor sentiment.
Dividend Yield and Payout Ratios
WFRD has declared a quarterly dividend of $0.25 per share, translating to an annual dividend yield of 1.3%. The payout ratio stands at 20%, which is sustainable given the company’s earnings.
Analyst Consensus on Stock Valuation
According to recent analyst ratings:
- Buy: 5
- Hold: 8
- Sell: 2
The consensus leans towards a hold rating, indicating mixed sentiments among analysts regarding the stock's future performance.
| Valuation Metric | WFRD | Industry Average |
|---|---|---|
| P/E Ratio | 18.6 | 15.4 |
| P/B Ratio | 2.3 | 1.8 |
| EV/EBITDA Ratio | 10.5 | 9.0 |
| Current Stock Price | $78.00 | |
| 12-Month High | $90.00 | |
| 12-Month Low | $50.00 | |
| Dividend Yield | 1.3% | |
| Payout Ratio | 20% |
Key Risks Facing Weatherford International plc (WFRD)
Key Risks Facing Weatherford International plc
Weatherford International plc faces a variety of risks that could impact its financial health and operational performance. These risks can be categorized into internal and external factors.
Industry Competition
The oil and gas industry is highly competitive, with numerous players vying for market share. The company’s ability to maintain or grow its market position is challenged by competitors who may offer similar services at lower prices. In the nine months ended September 30, 2024, total revenues were $4.17 billion, representing an increase of 11% from $3.77 billion in the same period of 2023. However, revenue growth in North America has been sluggish, contributing to increased competition for project bids and pricing pressure.
Regulatory Changes
Regulatory changes pose significant risks, particularly as new environmental and safety regulations can increase operational costs. In December 2023, Ireland enacted tax legislation modeling the OECD's global minimum tax rate of at least 15% for large multinational corporations. This could potentially increase the company's tax liabilities, impacting net income. As of September 30, 2024, the uncertain tax positions stood at $265 million, which could decrease by up to $6 million in the next twelve months.
Market Conditions
Fluctuations in oil and gas prices greatly affect revenue. Average oil prices for West Texas Intermediate crude oil decreased by 7% in the three months ended September 30, 2024, compared to the same period in 2023. The decline in prices can lead to reduced exploration and production spending by clients, directly impacting revenue and profitability.
Operational Risks
Operational risks are prevalent, particularly in terms of service delivery and project management. The company reported an operating income of $740 million for the nine months ended September 30, 2024, a 23% increase from $604 million in 2023. However, inefficiencies or delays in project execution could lead to cost overruns and impact operational margins.
Financial Risks
Financial risks primarily relate to credit and liquidity. As of September 30, 2024, the company had long-term debt of $1.63 billion, which requires ongoing cash flow to service. Any downturn in revenue could strain liquidity and hinder the ability to meet debt obligations. Interest expense for the nine months ended September 30, 2024, was $77 million, down from $92 million in 2023.
Strategic Risks
Strategic risks arise from potential misalignment with market demands or failure to innovate. The company is investing in research and development, with selling, general, administrative, and R&D costs amounting to $719 million for the nine months ended September 30, 2024. If these investments do not yield profitable innovations or improvements, the company may fall behind competitors.
Mitigation Strategies
The company employs various mitigation strategies to address these risks. These include diversifying its service offerings, enhancing operational efficiencies, and maintaining a robust cash reserve. As of September 30, 2024, cash and cash equivalents stood at approximately $118 million, which provides a buffer against liquidity challenges.
| Risk Type | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | High competition for market share and pricing pressure | Revenue growth may stagnate | Diversification of services |
| Regulatory Changes | Changes in tax legislation and environmental regulations | Increased operational costs | Compliance and adaptive strategies |
| Market Conditions | Fluctuations in oil and gas prices | Impact on revenue | Hedging and cost management |
| Operational Risks | Service delivery and project management challenges | Cost overruns and margin pressure | Improved project management practices |
| Financial Risks | Credit and liquidity risks | Strain on cash flow | Maintaining cash reserves |
| Strategic Risks | Failure to innovate or align with market demands | Loss of competitive edge | Increased R&D investment |
Future Growth Prospects for Weatherford International plc (WFRD)
Future Growth Prospects for Weatherford International plc
Analysis of Key Growth Drivers
Weatherford International has identified several key growth drivers that are expected to propel future growth. These include:
- Product Innovations: Continuous investment in research and development has led to new product offerings, particularly in drilling and evaluation services.
- Market Expansions: The company is focusing on expanding its footprint in high-growth regions such as the Middle East and Asia-Pacific.
- Acquisitions: In 2024, Weatherford closed acquisitions totaling $160 million, enhancing its service capabilities and market reach.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections for 2024 indicate a strong trajectory, with total revenues expected to reach $4.2 billion, reflecting an increase of 11% from $3.8 billion in 2023. Earnings per share estimates are also promising, with basic income per share projected at $5.39 for the year.
Strategic Initiatives or Partnerships That May Drive Future Growth
Weatherford is actively pursuing strategic initiatives to bolster its growth. Key initiatives include:
- Partnerships with Local Operators: Collaborating with regional operators in emerging markets to enhance service delivery and market penetration.
- Investment in Technology: Allocating approximately 3-5% of revenue to capital expenditures, focusing on innovative technologies to improve operational efficiency.
Competitive Advantages That Position the Company for Growth
Weatherford maintains several competitive advantages that contribute to its growth potential:
- Diverse Service Offerings: A comprehensive range of services across the oil and gas value chain, including drilling, evaluation, and production services.
- Strong Market Presence: Operations in approximately 75 countries with over 330 operating locations, facilitating quick response times and localized service.
- Operational Efficiencies: Improved operational efficiencies have led to increased resource utilization, enhancing profitability.
| Metric | 2024 Estimate | 2023 Actual | Year-over-Year Growth |
|---|---|---|---|
| Total Revenue | $4.2 billion | $3.8 billion | 11% |
| Operating Income | $740 million | $604 million | 23% |
| Basic Income per Share | $5.39 | $3.85 | 40% |
| Capital Expenditures | 3-5% of revenue | N/A | N/A |
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Article updated on 8 Nov 2024
Resources:
- Weatherford International plc (WFRD) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Weatherford International plc (WFRD)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Weatherford International plc (WFRD)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.