Tenaris

Company Update:
Tenaris released Q326 numbers. Sales reached US$3,102m (+4% yoy, +5% qoq), EBITDA US$756m (+0%), operating income US$598m (+0%) and net result US$521m (+15%). Net cash at the end of Q326 reached US$3.8bn (US$3.6bn in Q2). Looking forward For the fourth quarter, the group expects an increase in in sales and EBITDA reflecting higher OCTG demand and prices in north America and an increase in shipments to offshore projects. The fourth quarter should set a new quarterly baseline for sales and EBITDA going into FY27 assuming no significant change in the political context.

The numbers came in above consensus, most of all at operating profit level (EBITDA and EBIT) reflecting a better than expected pricing environment in the context of high oil prices.

Security and diversification of supply have become key concerns, supporting the industry.

USA, Canada and Mexico are leading the show while drilling in the Middle-East is said to be slowly recovering.

US inventories are down which should further support prices.

The outlook is also supportive with Q4 expected to be even better. For these reasons, the consensus for FY26 should reset a tick higher.

Positive market reaction expected and the news should benefit to French peer Vallourec as well.

Expert Opinion:
The sharp fall in Oil prices is likely to offset the good news on resumption of drilling orders in the middle east. Valuation isn't overly expensive trading at PE26 and 27e of 14x and 12.2x but unlike Vallourec we see little fundamental upside at these levels.  Vallourec is probably a riskier yet more attractive play at this stage of the cycle. 


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