Urbanization And Replacement Cycles Will Drive Deepwater Expansion

Key Takeaways

• Rising tariffs, falling imports, and stronger domestic positioning could deliver sustained pricing power and structural margin gains for Tenaris in key U.S. markets.
  
• Expansion into deepwater and frontier projects, plus supply chain localization and new infrastructure cycles, set the stage for above-industry growth and improving returns.
  
• Heavy reliance on oil and gas markets, customer concentration, and trade barriers leave Tenaris exposed to structural demand decline, margin compression, and earnings volatility.

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.

• While analyst consensus sees tariffs as a catalyst for higher domestic prices in North America, they are likely understating the potential magnitude and duration of price increases as inventory overhang dissipates and imports fall sharply; this could drive a structural step-change in both revenue and margins, positioning Tenaris for sustained U.S. outperformance as domestic market share and pricing power accelerate.
  
• Analyst consensus highlights Tenaris' improved differentiation with major shale operators, but the breadth of Tenaris's contract wins and rigorous expansion in deepwater, frontier basins, and line pipe projects globally signal a much larger structural backlog into 2026 and beyond; this points to a multiyear growth cycle that could boost earnings and cash flow at a rate well above industry expectations.
  
• The scale and speed of the global oil and gas infrastructure replacement cycle due to aging assets-and the requirement for higher-specification, regulation-compliant pipe-are poised to deliver a powerful, longer-than-expected tailwind for Tenaris, elevating baseline revenues as demand climbs across both developed and emerging markets.
  
• Growing national energy security concerns and the shift to local and friend-shored supply chains, especially in the Americas and MENA, significantly increase Tenaris's cross-regional pricing leverage and contract visibility, supporting higher forward net margins and reducing earnings volatility versus global peers.
  
• The combination of Tenaris's accelerating investment in automation, digitalization, and manufacturing integration-now coupled with potential M&A and further vertical integration opportunities-creates a pathway to industry-leading margin expansion and stronger free cash flow generation, further opening the door to enhanced returns of capital.

Tenaris Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Tenaris compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Tenaris's revenue will grow by 4.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 17.0% today to 16.5% in 3 years time.
• The bullish analysts expect earnings to reach $2.2 billion (and earnings per share of $1.96) by about September 2028, up from $2.0 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 12.2x on those 2028 earnings, up from 9.2x today. This future PE is lower than the current PE for the US Energy Services industry at 13.9x.
• Analysts expect the number of shares outstanding to decline by 4.51% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.88%, as per the Simply Wall St company report.

Tenaris Future Earnings Per Share Growth

Risks

• The global transition toward decarbonization and aggressive climate policies poses a long-term threat to oil and gas infrastructure demand, with management acknowledging customer caution in key markets and slower project pace in regions like Vaca Muerta, directly risking future revenue growth for Tenaris.
  
• Intensifying trade barriers such as the U.S. Section 232 steel tariffs, which doubled from 25% to 50%, are materially increasing Tenaris' cost of sales by up to $140 million per quarter; the company's ability to pass these on through higher selling prices is uncertain in the face of elevated inventories and subdued demand, threatening the company's net margins and profitability over the long term.
  
• Tenaris remains highly concentrated among a few major oil and gas clients, and recent commentary reflects this dependence-risks such as Pemex's severely reduced capital expenditure and delayed activity in Argentina's Vaca Muerta could spur significant earnings volatility if even one major customer scales back or reprioritizes spending.
  
• The company's revenue mix is still largely anchored in oil and gas tube products, with only incremental diversification into related services and technologies; this limited product diversification leaves Tenaris structurally exposed to secular demand declines as renewables and alternative energy outpace new oil and gas developments.
  
• Market dynamics in North America and globally remain challenged by persistent overcapacity and competition from low-cost suppliers, particularly from Asia, which has led to a surge in imports, excessive inventories, and ongoing pricing pressure-this environment could compress both revenues and gross margins, especially if technological advances further decrease steel pipe consumption per energy extracted.

Valuation

• The assumed bullish price target for Tenaris is €21.05, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Tenaris's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €21.05, and the most bearish reporting a price target of just €13.28.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $13.5 billion, earnings will come to $2.2 billion, and it would be trading on a PE ratio of 12.2x, assuming you use a discount rate of 6.9%.
• Given the current share price of €15.11, the bullish analyst price target of €21.05 is 28.2% higher.
• 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.