Investing.com --RBC Capital Markets upgraded NOV Inc to Outperform and downgraded Liberty Energy Inc to Sector Perform given the diverging growth prospects and risk profiles for the two companies.
RBC (TSX:RY) sees NOV as well-positioned to deliver strong results in 2025, driven by improving margins and consistent free cash flow.
The company has successfully addressed supply chain challenges and expects higher-margin backlog conversions to boost earnings.
RBC forecasts 6% EBITDA growth for NOV in 2025, outpacing the 2% average for large oilfield services peers.
NOV’s commitment to returning cash to shareholders is another positive, with plans to repurchase about 5-6% of outstanding shares in 2025.
RBC maintained its price target at $22, highlighting that the current valuation offers an attractive entry point.
But RBC took a more cautious stance on Liberty Energy due to its ambitious plans to expand into the power generation market.
While the strategy could drive long-term growth, it requires an estimated $4-5 billion in capital over 5-8 years, raising concerns about funding and execution.
Liberty expects to deliver 400MW of power capacity by 2025-26 but faces near-term challenges, including flat well completion activity and potential pricing pressures in its core fracturing business.
RBC also noted that Liberty’s free cash flow is expected to remain limited, with negative FCF projected in 2026 due to high capital spending. As a result, RBC lowered its price target to $19 from $24.
RBC’s ratings reflect a more confident outlook for NOV’s near-term performance, while Liberty Energy’s longer-term expansion plans introduce higher uncertainty.
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