Weatherford International plc (WFT) – Has it Hit Bottom?
Swiss-based oil and gas equipment and service provider Weatherford International plc (WFT, $7.39, up $1.12) rose 17.86% after the company reported 4th quarter results that beat on earnings and was in-line on revenue. For the quarter ending December 31, it reported earnings per share (EPS) of -$0.13 on $2.01 billion in revenue, down from $0.32 on $3.73 billion in revenue a year ago. But analysts had expected EPS of -$0.19 on $2.01 billion in revenue. Investors also cheered that the company plans to generate free cash flow (FCF) between $600 million and $700 million in 2016, up from analysts’ estimates of $495 million. Further, the company’s FCF was $168 million for the 4th quarter, and its full-year FCF was positive for the first time since 2010.
The $5.76 billion company’s stock peaked at $23 in July 2014 and has plunged with the fall in oil prices. To cope, the company cut 14,000 of its 53,500 workforce in 2015 and plans to cut an additional 6,000 jobs during the first half of 2016. The company will also close nine plants over the year. It plans to reduce its capital expenditures (CAPEX) by 56% to $300 million. Since stock price ideally equals the present value of future FCFs, and decreasing CAPEX increases FCF, the stock price should rise.