ProFrac cut, ProPetro raised at J.P. Morgan amid caution on oilfield services

ProFrac Holding (NASDAQ:ACDC) -10.2% in Friday’s trading as J.P. Morgan downgrades shares to Underweight from Neutral with a $7 price target, while the bank upgrades ProPetro (PUMP) to Neutral from Underweight with a $10 PT, as the bank sees oilfield services stocks (OIH) continuing to play second fiddle to E&P and other energy sub-sectors.

Based on more competitive frac market dynamics, JPM raises ProPetro (PUMP) and lowers ProFrac (ACDC) given the latter’s more attractive relative valuation, stronger balance sheet, and higher 2025 FCF/EV yield.

The two key culprits for the overall weakening spending picture, according to J.P. Morgan analysts led by Arun Jayaram, are an anticipated loosening in the oil market and declining capital intensity in North America, which are headwinds for oilfield services stocks.

In a more challenging macro environment, JPM says it prefers companies that are key enablers of efficiency gains and levered to capital spending trends less tied to rig activity; TechnipFMC (FTI) is the bank’s favorite way to play tightness in subsea equipment, while Baker Hughes (BKR) and Chart Industries (GTLS) look to be prime beneficiaries of the potential lifting of the U.S. LNG permit pause.

JPM also launches coverage on Valaris (VAL) and Noble (NE) with respective Underweight and Neutral ratings, given earnings risk and anticipation that floater dayrates could soften in 2025, while upgrading Transocean (NYSE:RIG) to Neutral given a more resilient earnings profile supported by its strong backlog.

Meanwhile, Overweight-rated Tenaris (TS) remains a top pick given its outsized exposure to Argentina amid the acceleration of activity trends in the Vaca Muerta.