Helmerich & Payne Price Target Cut by RBC to $53 From $65, Sector Perform Reiterated

Helmerich & Payne (HP) received a price-target cut from RBC Capital Markets as the firm lowered its estimates for the contract-drilling company’s bottom line in fiscal 2018 and 2019, citing a reduction in the US land rig cash margin-per-day progression.

The new price target is $53 per share, down from $65 but still above the stock’s Friday closing price of $45.48. RBC kept its investment rating on the stock at sector perform and said it views Helmerich & Payne “as a top-quality land driller due to its strong balance sheet, high spec fleet, and rig upgrade prospects.”

Helmerich & Payne on Thursday made some adjustments to its fiscal Q4 estimates. In its US land segment, the company now expects Q4 revenue days to be up by 5% to 6% sequentially, up from its late-July forecast for an increase of 3% to 5%. In its international land segment, the company now expects revenue days to be up by about 9% from Q3, with average rig margin per day now expected at about $8,500, versus its prior forecast for the Q4 revenue days to be flat with Q3 and average rig margin per day at about $7,500.

Following the guidance update, RBC said it narrowed its estimate for the company’s expected fiscal Q4 loss per share to a loss of $0.11 versus its previous estimate for a loss of $0.30 per share.

However, the firm reduced its estimates for Helmerich & Payne’s fiscal 2018 and 2019 EPS, saying the revisions were driven by a reduction in the US land rig cash margin-per-day progression. This change led to the price-target reduction.

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