Hunting PLC (LOP:HTG) shares have almost halved over the past year but UBS still downgraded the oil services engineer as it does not expect any upturn in the market.
The FTSE 250 group’s shares have underperformed the European oil field services sector, “driven by capital discipline amongst producers in the US onshore market and declining levels of activity”.
UBS analysts expect this environment will be “the new normal” and so do not expect a change in investor sentiment towards companies that are exposed to US onshore oil nor in levels of US drilling activity.
For Hunting’s Titan arm, the analysts forecast a continued decline in the US onshore market into 2021 with similar levels of profit margin.
Blending this with other US business, estimates for group revenues are cut 5%, 9% and 10% for the next three years and underlying profit (EBITDA) by 2%, 8% and 13%.
This outlook for the US onshore market seems to be “fairly reflected in the current share price”, the analysts said, downgrading to ‘neutral’ from ‘buy’ and slashing the share price target to 320p from 510p.