Tenaris is a leading energy services company with a strong market position, especially in the tubular goods market for oil and gas wells. The company has a conservative financial profile with low leverage and high interest coverage. However, despite its strengths and potential growth opportunities, concerns about valuation and future earnings decline suggest a Hold rating.
Tenaris’ recent quarterly results showed a decline in sales and EBITDA but an increase in net income. The company also proposed an impressive dividend increase of 18%. Despite these positives, the company’s valuation is considered to be too high given the expected decline in earnings over the next three fiscal years.
The author’s previous Buy rating has been revised to a Hold due to the company’s current valuation. The author believes that Tenaris is a good company but that its current valuation does not offer a favorable risk-reward proposition.
