NBR: Offshore Cycle Normalization Will Likely Cap Gains Despite Recent Optimism

Analysts have modestly increased their price target on Nabors Industries, reflecting a recalibrated discount rate and generally constructive Street research citing improved international growth, stronger balance sheet leverage from the $625M Quail Tools sale, and updated guidance that collectively support a fair value estimate near $51 per share.

Analyst Commentary

Street research remains broadly constructive on Nabors Industries, with several firms lifting their price targets in response to stronger fundamentals, while still highlighting execution and cycle risk over the medium term.

Bullish Takeaways

• Bullish analysts point to year over year growth in international markets as a key driver of higher earnings power, supporting the recent upward revisions to fair value estimates.
• The $625M Quail Tools divestiture is seen as materially improving financial leverage, enhancing balance sheet flexibility for capital allocation and debt reduction.
• Updated guidance and recent results are viewed as broadly aligned with expectations, reinforcing confidence that management can execute on its multi year growth and margin expansion plans.
• The sequence of target increases into the mid 50s and mid 60s per share is framed as recognition that Nabors is better positioned in the current Energy Services and Equipment cycle than previously modeled.

Bearish Takeaways

• Bearish analysts maintain more cautious ratings despite raising their targets, reflecting concern that current valuation already discounts much of the expected operational improvement.
• There is explicit focus on potential downside to performance estimates in 2026, with some seeing risk that the current drilling upcycle could normalize faster than embedded in forecasts.
• More conservative views stress that guidance upgrades are incremental rather than transformational, leaving limited room for error if international growth moderates or pricing power softens.
• Residual leverage and capital intensity in the business model are cited as ongoing constraints, with downside risk if macro conditions weaken or if free cash flow underdelivers against current projections.

What's in the News

• The Trump administration is reportedly drafting a plan to resume offshore oil drilling off California between 2027 and 2030, potentially boosting activity and equipment demand for drillers including Nabors Industries, as well as peers such as Baker Hughes, Halliburton and SLB (Washington Post)
• Caturus Energy has awarded Nabors a multi year contract for its high spec PACE X Ultra X33 rig, supporting Nabors position in advanced onshore drilling and high pressure, long lateral wells in the Eagle Ford and Austin Chalk (company announcement)
• The X33 deployment incorporates natural gas powered Cat Dynamic Gas Blending technology, highlighting Nabors role in lowering fuel costs and emissions intensity in challenging drilling environments (company announcement)
• Nabors has completed its long running share repurchase program initiated in 2015, retiring a total of 14,012,000 shares for approximately $121 million, with no additional shares repurchased in the most recent quarter (company filing)

Valuation Changes

• Fair Value Estimate is unchanged at approximately $51.13 per share, indicating no material revision to the core valuation target.
• The Discount Rate has fallen modestly from 12.50 percent to approximately 12.07 percent, reflecting slightly lower perceived risk in the cash flow outlook.
• Revenue Growth is effectively unchanged at about 3.96 percent, signaling stable assumptions for top line expansion.
• Net Profit Margin is essentially flat at roughly 6.63 percent, indicating no meaningful change in long term profitability expectations.
• The Future P/E has decreased slightly from about 533.1x to roughly 527.1x, pointing to a marginally less demanding valuation multiple on forward earnings.