Hunting's Titan is vulnerable to competition, Credit Suisse says

Hunting shares jumped on 27 February as the company announced its first share buyback and reported a decline in annual profit caused by a slowdown in the US shale gas sector.

The shares' rise was a reaction to the buyback and relief that the results were not worse, Credit Suisse said. The Swiss bank's analysts David Farrell and Chintan Khamar reduced their target price for Hunting to 370.0p from 410.0p and maintained their 'neutral' rating.

The analysts said the technological lead the Titan division had over its rivals in US shale is being eroded as new products are developed, squeezing Titan's margins from 28% in the first half of 2018 to 18% in the first half of 2019. With too much capacity in the US shale market, price pressure is a threat in 2020 as rivals battle with Titan for market share, they added.

The situation will get worse if the lower oil price reduces US shale activity further and the recovery in Hunting's other businesses ran out of steam in the second half of 2019. Farrell and Khamar cut their earnings forecasts for 2020/21 by 2% to be about 15% below consensus.

The bright spot in the results was the outlook for divisional regions, driven by the company's increasing exposure to the offshore energy market, the analysts said.