National Bank’s Dan Payne raised his CES Energy Solutions Corp. target to $9.25 from $7 with a “sector perform” rating. The average is $8.97.
“Certainly one of the names with the greatest momentum in the [oilfield services] group, the company has seen top tier share price performance (127 per cent year-to-date) and multiple expansion (57 per cent to 5.7 times year-to-date), as a function of an expanded appreciation for the strength & value of its expanding margin profile that comes as a result of the ‘intensity thematic’ and quality of offering. To that end, Q1/24 margins were a massive blow-out (17.3 per cent vs. 15.3 per cent prior Q), again as a reflection of greater economies of scale and market share being generated from the sale of more and higher-quality specialty chemicals (rather than top line pricing), and as a result, its historical margin forecasts (in the 14-15-per-cent range) is being reassessed. With that, and in association with the strength of its competitive positioning (improved with recent market consolidation), we continue to expect street estimates to drift higher as it embeds a more realistic long-term top-line & margin assumption (we are focused on the latter, and are conservatively walking towards 16.0-16.5 per cent on our forecasts), and which in an otherwise static activity environment, provides a backdrop of value expansion for the company and its equity. That said, Q2/24 results will likely check-back seasonally from the highs of the first quarter, where we are forecasting estimates generally in-line with the street.”