VTOL - Bristow: No Near-Term Catalysts But Upgrading To 'Hold' On Valuation
2023-03-16 00:39:49 ET
Summary
- Leading offshore helicopter services provider reports another set of mediocre quarterly results with free cash flow deteriorating to new multi-year lows due to significantly increased capital expenditures.
- Company perplexed investors by pulling forward $137 million in capital expenditures related to the second-generation UK SAR contract "to ensure successful transition and mitigate contract execution risk".
- Consequently, free cash flow is likely to remain negative in both 2023 and 2024 which apparently doesn't bode well for potential share buybacks under the company's $40 million stock repurchase program.
- While increased offshore drilling activity provides some tailwinds for the oil and gas services segment, improvements will be weighed towards the second half of the year.
- Given the lack of near-term catalysts and management's subpar performance in recent quarters, it's hard to make a case for the stock. That said, with shares now trading at a 55% discount to estimated net asset value, I am upgrading Bristow Group from "Sell" to "Hold".
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Bristow: No Near-Term Catalysts But Upgrading To 'Hold' On Valuation