Weatherford (WFT) Positioned as Juicy M&A Target on Products, Presence (GE) (HAL)

December 5, 2012 9:41 AM EST
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Weatherford (NYSE: WFT) might be on the move today as at least one outlet sees it as a potential M&A target.

According to Dahlman Rose analyst James Crandell, Weatherford is ripe for the picking on two key reasons:
  1. the filing of its back 10-Ks and 10-Qs and subsequent settlement with regulators will free-up Weatherford to focus on reducing debt while improving free cash flow and return on capital; and

  2. the stock is undervalued at current market prices.

Crandell notes that Weatherford is looking to cut debt by $2.5 billion to $3.0 billion by the end of next year. This will be achieved via reduced capital spend, asset sales, increasing net income, and working capital reduction.

Given the company's goal, Crandell sees Weatherford earnings $1.30 per share in FY13 and $2.00 in FY14. Fundamentally, he thinks shares should be trading near $18 over the next 12 months.

On an acquisition, Crandell cites Weatherford's "core product lines, its global presence, and multinational tax structure."

Halliburton (NYSE: HAL) and General Electric (NYSE: GE) might be eying the company. Halliburton might like the company for its leadership position in artificial lift, a strong presence in Russia, and "complementary formulation evaluation efforts." GE could pick up Weatherford simply to solidify its disparate product lines, while making it a major player in the sector.

Dahlman Rose rates Weatherford at Buy with the aforementioned $18 price target. Shares are up 4 percent Wednesday.

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