Energy services company John Wood Group’s (GB:WG) stock went down by 2.5% on Tuesday, despite the company returning to profit zone in its half-yearly results for 2022.
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Profits for the period were at $89 million, compared to a loss of $11 million last year.
The highlight of the results was the various contracts won by the company, helping the company to achieve its revenue growth goals for the full year. The contracts were won across all segments and include a 10-year partnership with Chevron. Other contracts are with Esseco, Solvay, Equinor, INEOS, and more.
The company posted a slight decline of 0.4% in its revenues, and the operating profit was down by 8.9% to $41 million. Strong growth in its consulting business was offset by the 15% decline in project revenues.
But investors were expecting something more impressive as the energy sector is witnessing huge profits driven by high commodity prices.
Overall, the stock is down by 35.6% in the last year.
Wood Group is a UK-based company providing consulting and engineering services in the energy sector.
Mixed results, solid outlook
The company’s debt increased by 21% to $2.1 billion. The cash position was adversely affected by working capital requirements and some exceptional costs of $102 million, which included a settlement payment to the Serious Fraud Office (SFO).
Considering its debt, the company decided not to declare any dividends in 2022.
Adam Vettese, an analyst at investment platform eToro, said, “Given the company’s disappointing cash flow position and elevated debt levels, we think it is unlikely to resume its dividend until at least next year, and possibly longer.”
Looking ahead, the company remains positive for its full-year numbers in 2022. The revenue guidance is between $5.2 million and $5.5 million, driven by order book growth and significant contracts won by the company.
What is forecast for Wood Group’s stock?
According to TipRanks’ analyst rating consensus, Wood Group’s stock is a Strong Buy, based on four Buy ratings.
The Wood Group price target is 292.75p, which represents a big 100.7% change from the current price level. It has a low forecast of 270p and a high forecast of 320p.
Conclusion
With some great contract wins, the management is confident about the future growth of the company. The company still has a lot to do to strengthen its balance sheet, generate a return for its shareholders, and resume dividends.
