Oil and gas industry services company Helix Energy Solutions Group (NYSE:HLX) has grabbed investors’ attention with a 62% surge in its shares over the past year. Despite reporting weaker-than-expected top-and-bottom-line results in Q1 2024, the company still managed to increase gross profits and free cash flow. Management remains bullish for the near term, as several low-profit legacy contracts are set to expire and adapt to current market rates in 2025.
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The shares trade at a relative discount to industry peers and given the anticipated improvements in profitability and cash generation in 2025 and beyond, it appears to be an attractively priced opportunity with an upside potential.
Helix Supporting the Global Energy Transition
Helix Energy Solutions Group is an international offshore energy services provider focusing on specialty services such as well intervention (well work), robotics, and full-field decommissioning operations. Its unique business model supports the global energy transition by maximizing the extraction of remaining oil and gas reserves, backing renewable energy developments, and decommissioning oil and gas fields.
The company operates across major global regions like the Gulf of Mexico, Brazil, and the North Sea and is recognized in the industry’s robotics. Helix’s well intervention and maintenance services, delivered through its Robotics division, are highly sought after.
Helix’s Recent Financial Results & Future Outlook
However, Helix presented disappointing Q1 2024 results, underperforming on its earnings per share (EPS) and revenue expectations. Reported revenue of $296.21 million fell slightly short of the predicted $296.72 million target. Additionally, the company reported an EPS of -$0.17, missing analysts’ estimations of $0.02.
Even though they reported a net loss of $26 million in Q1 of 2024 and a drop in robotics vessels’ utilization from 91% to 74%, Helix’s gross profits increased by 16%. The company also reported a significant improvement in its free cash flow, moving from a loss of $12 million in Q4 of 2023 to a positive $61 million.
The company finished the quarter with cash and cash equivalents of $323.8 million and available capacity under an ABL facility of $95.6 million, resulting in a total liquidity of $419.4 million.
Management has given guidance for FY2024, projecting revenue of $1.2-$1.4 billion, EBITDA between $270-$330 million, and free cash flow of $65-$115 million.
What Is the Price Target for HLX Stock?
Analysts following the company have been constructive on the stock. Based on two analysts’ recommendations and price targets issued over the past three months, the stock is rated a Moderate Buy. The average price target for HLX stock is $16.00, representing a potential upside of 39.62% from current levels.
The stock has been on an upward trend, climbing over 88% in the past three years. It trades at the upper end of its 52-week price range of $6.97 – $12.14 and continues to show positive price momentum, trading above its 20-day (10.76) and 50-day (10.86) moving averages. Despite robust price appreciation, the shares appear to be relatively undervalued based on a Price to Book Value of 1.191 compared to the Oil & Gas Equipment & Services industry average of 1.99.
HLX in Summary
Shares of HLX have been on an upward trajectory over the past few years. Although Q1 2024 presented some financial disappointments, the company still reported increased gross profits and free cash flow. Management is confidently gearing up for several transitioning contracts, suggesting further growth in profitability and cash generation. This, coupled with the stock’s relative discount, makes Helix a potentially appealing investment opportunity for long-term investors.
