15.01.2025
Yesterday morning Hunting (LON:HTG) issued its Trading Update for the year to end-December 2024 – it was very well received in the market, with investors taking its shares up 52p to 352.50p at one stage, before ending the day at 345p.
So that already shows a good performance from the feature made last Friday when the shares were 303.50p – much as predicted in being a pivotal price move.
The £550m capitalised precision engineering group noted that trading in Q4 2024 had remained in line with management's expectations and with the guidance issued in October 2024, with EBITDA anticipated to be in the range of $123-$126m for the full year, on a margin of around 12%.
CEO Jim Johnson stated that:
"I would like to thank the Hunting team for delivering another year of strong growth, with firm progress towards a number of the key 2030 strategic objectives that we identified at our Capital Markets Day, namely positive growth of revenue, EBITDA, margins, cash and bank and continued diversification of our service offering and revenue streams.
This growth has been delivered against a challenging industry backdrop through 2024, particularly in North America, which saw lower than expected activity due to depressed gas prices.
Pleasingly, these challenges are beginning to subside with the natural gas price in the US ending the year strongly, which will likely lead to more drilling in the US and Canada, which will be further supported by the new US administration.
2025 should, therefore, deliver a further year of growth and with strong acquisition opportunities, a healthy balance sheet, and a robust cost cutting programme that includes the consolidation of our EMEA operations, our profits and returns should continue to advance in the year ahead."
The Business
Hunting is a global, precision engineering group that provides precision-manufactured equipment and premium services.
The company maintains a corporate office in Houston and is headquartered in London.
As well as the UK, the company has operations in China, India, Indonesia, Mexico, Netherlands, Norway, Saudi Arabia, Singapore, the UAE and in the USA.
It has five product groups: OCTG, Perforating Systems, Subsea, Advanced Manufacturing and Other Manufacturing.
The group has five operating segments: Hunting Titan; North America; Subsea Technologies; Europe, Middle East and Africa, and Asia Pacific.
Its manufacturing footprint is around 50% in the United States, with the balance widely spread in Europe, Asia & the Middle East.
It is a specialist manufacturer of customised, high-value components typically for the oil and gas industry, with its chief product lines being perforating guns and associated systems, oil country tubular goods premium connections, subsea, and advanced manufacturing.
Almost all of its businesses provide high-performance equipment, typically manufactured to tight tolerances using CNC equipment and to a mixture of Hunting and third-party specifications.
Buyers for its products include the oil service majors such as Schlumberger, Baker Hughes & Halliburton, with which it also competes, as well as oil companies directly and a wide range of customers in other industries.
These include geothermal and carbon capture, as well as aviation, defence, space, and other specialist capital equipment applications.
Its manufacturing footprint serves these customers worldwide, and hence activity in one region may be used for projects elsewhere in the world.
Analyst View
Analyst Alex Brooks, at Canaccord Genuity Capital Markets, rates the group’s shares as a Buy, looking for 600p a share as his Price Objective.
He noted a certain caution in Management comments and accordingly lowered his estimates for the 2025 and 2026 years.
Brooks now looks for sales to be around $1,106m against the 2024 figure of $1,050m and his previous 2025 estimate of $1.171m, while his 2026 figures are for $1.202m a drop from $1,271m.
His 2025 adjusted pre-tax profits for 2025 and 2026 respectively are now for $104.1m and $130.0m, lifting earnings of $0.46c and $0.58c and dividend of $0.12c and $0.14c per share.
Analysts at Berenberg yesterday raised their Target Price for the group’s shares to 480p.
Some six analysts follow the group rating its shares as a Buy, with the highest Target Price suggested being 730p, the lowest 515p, and the average being 610p a share.
In My View
On the back of estimates out in the market for this and next year, I take the view that Hunting’s shares at the current 345p are an attractive, well-based play within the global energy sector.
They were up to 465p in July last year, which is a price that, if the orders keep on rolling in, I can see being achieved within the next year.
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