Expanding Global Infrastructure Will Unlock Opportunities But Face Transition Risks

Key Takeaways

• Strategic expansion in key regions and innovation in premium products position Tenaris to capture market share and sustain revenue growth.
  
• Manufacturing efficiency and favorable trade policies enhance cost competitiveness and support long-term margin resilience.
  
• Structural declines in core markets, regulatory and trade headwinds, volatile inventories, and rising competition threaten Tenaris's future earnings, margins, and market positioning.

Catalysts

Manufactures and supplies steel pipe products and related services for the energy industry and other industrial applications in North America, South America, Europe, the Middle East and Africa, and the Asia Pacific.

• Ongoing global energy demand, supported by population and economic growth, continues to drive long-term investments in oil & gas infrastructure, illustrated by Tenaris's expanding backlog of large-scale projects (e.g., Brazil, Nigeria, Guyana-Suriname Basin, Vaca Muerta), which is likely to underpin resilient future revenues.
  
• The dual focus on energy security and regional diversification is prompting new exploration and development in strategic markets (e.g., Middle East, Latin America), allowing Tenaris to capture incremental sales from both traditional and frontier basins, supporting revenue stability and expansion.
  
• Investments in manufacturing efficiency, capacity expansions (notably in the U.S. and through vertical integration), and product innovation (such as dopeless OCTG and advanced coatings) are expected to improve cost competitiveness and drive higher net margins as industry demand shifts toward premium, high-specification products.
  
• Structural reduction in imports due to higher U.S. tariffs and tighter trade policies, combined with Tenaris's strong domestic production base, positions the company to capture additional market share and improve pricing power in North America, which should benefit revenue and support margin resilience.
  
• The gradual drawdown of oversupplied U.S. inventories and ramp-up of new offshore and large pipeline projects in 2026-2027 are expected to materially lift volumes and strengthen operating leverage, supporting a rebound in earnings and free cash flow over the medium term.

Tenaris Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Tenaris's revenue will grow by 1.2% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 17.0% today to 14.6% in 3 years time.
• Analysts expect earnings to reach $1.8 billion (and earnings per share of $1.74) by about August 2028, down from $2.0 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.1 billion in earnings, and the most bearish expecting $1.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.4x on those 2028 earnings, up from 9.3x today. This future PE is lower than the current PE for the US Energy Services industry at 12.9x.
• Analysts expect the number of shares outstanding to decline by 5.37% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Tenaris Future Earnings Per Share Growth

Risks

• Global energy transition and intensifying regulatory pressures on decarbonization threaten long-term demand for oil and gas infrastructure, exposing Tenaris to structural declines in its core OCTG products and risking future revenue and earnings contraction as fossil fuel investments taper off.
  
• Ongoing exposure to Section 232 tariffs and trade uncertainties-including the recent doubling of U.S. tariffs to 50% on steel imports from key supply countries-could inflict sustained cost inflation, margin compression, and reduced competitiveness, especially if renegotiations do not succeed, negatively impacting net margins and operating profit.
  
• Persistent high inventory levels in the U.S. (both onshore and incoming imports) and subdued drilling activity could prolong pricing pressures, delay meaningful price recovery, and hinder margin expansion, making short
• to medium-term revenue and earnings growth less predictable.
  
• Geographic concentration and reliance on highly volatile regions, such as South America (Argentina and Mexico) and the United States, expose Tenaris to political risk, slow access to financing for customers, and economic uncertainty, potentially resulting in future revenue volatility and collections risk.
  
• Intensifying global competition from lower-cost Asian manufacturers and the risk of industry shifts toward alternative non-steel drilling technologies may erode Tenaris's market share and pricing power, leading to margin pressure and long-term stagnation in earnings if product diversification does not keep pace with industry evolution.

Valuation

• The analysts have a consensus price target of €17.54 for Tenaris based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €20.69, and the most bearish reporting a price target of just €13.25.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $12.2 billion, earnings will come to $1.8 billion, and it would be trading on a PE ratio of 12.4x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of €15.3, the analyst price target of €17.54 is 12.7% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.