Hunting stock surges on cash position beat

Investing.com -- Shares of Hunting (LON:HTG ) climbed 11.7% as the energy services company reported fourth-quarter results that were in line with expectations and a significant beat on its net cash position. The company's FY24 revenue is projected to be between $1.04 billion and $1.05 billion with EBITDA of $123 million to $126 million, matching guidance and consensus estimates.

Notably, Hunting anticipates ending FY24 with net cash (excluding leases) of $100 million to $105 million, which is over 50% higher than the previous guidance of $60 million to $70 million.

The increase in net cash is attributed to management's efforts to reduce inventories, robust cash generation in the fourth quarter, and the implementation of the KOC accelerated receivables plan along with letters of credit. However, Hunting's FY25 EBITDA guidance of $135 million to $145 million, although reflecting a 12% year-over-year (YoY) increase and continued margin progress, falls around 10% short of current consensus estimates.

This conservative forecast is due to a lower $500 million order book and a cautious stance on the outlook for the U.S. business.

In addition to the ongoing cost savings program, Hunting announced plans to restructure its EMEA division, which is expected to yield approximately $10 million in net cost savings. With a forecasted free cash flow (FCF) conversion rate of around 50%, the company projects its net cash position (excluding leases) will rise to $135 million to $145 million by FY25.

RBC analyst Victoria McCulloch commented on the results and outlook, stating, "We remain positive on the outlook for Hunting, particularly in the OCTG and Subsea businesses which have performed above management's 15% EBITDA target and see attractive tendering opportunities in 1H25."

The analyst endorsement highlights the strengths in specific divisions of Hunting's operations and suggests potential growth areas for the first half of FY25.

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Source: Investing.com