Analyst Note| Katherine Olexa |
After incorporating Tenaris’ first-quarter results, we’re raising our fair value estimate to $37 (EUR 20) from $32 (EUR 15). Our improved outlook for Tenaris’ profitability potential drives most of the increase. By our estimate, the firmwide adjusted EBITDA margin will average 29% over the next five years, compared with our prior estimate of 24%. In short, we expect a more favorable product mix will offset normalizing tubes demand over the next five years. We still expect the currently advantageous pricing dynamics will abate over the next few quarters, however, we’re now more confident the firm will secure more margin-accretive revenue streams, further supported by internal cost management initiatives. Customers continue converting to Tenaris’ Rig Direct solution, which will optimize the firm’s demand planning, especially as product adoption persists. Both factors reflect longer-term developments, so most of the margin improvement falls around 2025 and beyond.