Weatherford Upgraded As A Recovery Could Be Coming

Surmising that a recovery might be around the corner, Bernstein upgraded shares of Weatherford International Plc WFT. The firm said the stock could benefit from an improving business, a risked assessment of tangible improvement actions, and an asymmetric risk/reward vs current valuation.

The firm upgraded its rating on the stock from Market Perform to Outperform and also increased its price target from $5.50 to $6.60.

At time of writing, shares of Weatherford were up 5.26 percent at $4.01.

Analyst Colin Davies said the company's turnaround has now moved beyond the notional to become pragmatic and specific. For the full benefits to be realized, the analyst said, it will take two to three years.

Outlining the actions underway, the analyst said the company has embarked on a reorganization to help realize run rate savings of $115 million through the first quarter of 2018. By year-end 2018, the company targets an incremental cost savings of $300 million, with an additional but notional $700 million targeted by year end 2019, Davies said.

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Bernstein said it heavily risks the potential at about 35 percent of the $1 billion through 2019.

The firm believes a large non-core asset disposal program will take longer, with the firm seeing it as a risk area. That said, the firm still thinks a larger restructuring than the $500 million targeted for 2018 will still proceed in 2019, or earlier if conditions improve.

With the company targeting positive free cash flow, before specials, in the next quarter and in 2018, the firm sees the free cash, OneStim and potentially a land rig sale as nearer-term catalysts.

"Weatherford is a classic turnaround story under a new and credible leader. While implementation risk remains, we are encouraged by the specific and tangible nature of the actions," the firm said.