Weatherford International (WFT) Message Board

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Gold/Mining/Energy : Weatherford International (WFT)

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From: Dennis Roth	1/28/2008 10:05:40 AM
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Weatherford International Ltd. (WFT): Strong international growth and margin trends support Buy rating - Goldman Sachs - January 28, 2008 What's changed On Friday, Weatherford reported 4Q07 EPS of $0.99, which was $0.03 above ours and the consensus forecast of $0.96. Better than expected margins in the Latin America and Europe/CIS/West Africa segments and a lower reported tax rate helped offset lower than expected North America operating margins. We are modestly adjusting our 2008/2009/2010 EPS estimates by -$0.03/+$0.03/-$0.03 to $4.35/$5.71/$6.06 due to a slightly higher expected tax rate and interest expense going forward. Our $74 (17.0x 2008 P/E) 12-month price target is unchanged. Implications We maintain our Buy rating on Weatherford and continue to believe it is the best international growth story in oil services. We expected Weatherford to differentiate itself internationally this quarter, and it did exactly that with impressive Latin America and Eastern Hemisphere revenue growth and margin expansion. We are forecasting EPS to grow considerably faster than its services peers over the next two years (2008/2009 growth rate 30%/31% vs. 21%/21% for peers), yet the shares continue to trade at an in-line multiple with the group. The market still appears to be skeptical of Weatherford’s aggressive growth targets, especially following more conservative outlooks by its peers and because of the execution challenges with expanding internationally. However, we believe Weatherford’s strategy of expanding product lines into new international markets will continue to prove successful, leading to faster growth, margin upside and stock outperformance relative to peers. Valuation Weatherford is trading at 2008 P-E/EV-DACF of 14.2x/10.1x versus the peer group (Baker Hughes, Halliburton, Smith, Schlumberger) at 13.8x/10.6x. Key risks Key risks include weaker than expected global economic growth or lower than expected international oil company spending.

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