Frank’s International Stock Forecast

Frank’s International Stock Forecast: Sometimes investors have the best luck investing in the companies that operate behind the scenes. These companies may not get many headlines, but with a little work, you can find stocks that enable other industries.

Within the field of technology, this is the premise behind investing in the companies that make the microprocessors that power popular devices like smartphones or tablets, but technology is not the only industry that presents this opportunity.

The oil and gas industry also includes companies that make the components that big-chip gas giants need to run their respective businesses. One such stock is Frank’s International [NYSE: FI].

What Does Frank’s International Do?

Frank’s International is in a very unique business – tubular products for oil and gas company applications. Frank’s has one of the largest catalogues of tubular products in the world and a wealth of expertise.

The company has been around since 1938 when it was called Frank’s Casing Crew & Rental Tools.

Frank’s also manufactures the downhole tools used in oil wells and the tubular running that make it all work. Its tubulars can span up to 300 feet.

What the company doesn’t make, it distributes. It maintains a large inventory of pipe with large outer diameters (normally referred to as OD pipe) to suit every need and application. Further, the company supports fabrication of the products as well as welding services.

Frank’s has been so strong on this front that it has developed its own proprietary equipment and technologies. The patents for these items have a certain value too.

Finally, Frank’s has an additional component – Blackhawk Specialty Tools. It acquired the business in 2016. The move allowed the company to leverage Blackhawk’s expertise in cementing tools and well intervention to further bolster its product offering.

Is Frank’s International a Buy?

Frank’s International [NYSE: FI] operates in a few different segments. Its International Services segment is its most lucrative. It brought in 42.6% of the company’s revenue in 2018. That percentage is large, but it does represent a decline from previous years.

For instance, International Services represented 45.5% of the company’s revenue in 2017. At the same time, Frank’s annual revenue grew to $522.5 billion in 2018 from $454.8 billion in 2017 – so the change is significant.

Frank’s defines International Services as the tubular services it offers in both international offshore drilling and onshore drilling that takes place in international regions.

Many oil and gas exploration companies fall into this category. As of December 31, 2018, Frank’s participated in serving the needs of several companies across some 50 countries spread over six continents – the company is just everywhere!

US Services made up 28.5% of Frank’s annual revenue in 2018 – up from 26.1% in 2017. This segment involves onshore drilling stateside and in the Gulf of Mexico. Some of the popular regions Frank’s covers includes Green River Basin, Marcellus/Utica Shale, and the Permian Basin.

Blackhawk represented Frank’s third most lucrative segment in 2018, bringing in 17.1% of the company’s revenue. In 2017, that figure was just 15.6%. This part of Frank’s business includes well construction and intervention products and services. Blackhawk customers are located in the US as well as international locations.

The fourth segment in Frank’s International is Tubular Sales. It brought in 11.8% of sales in 2018, a small decline from 2017 when it posted 12.8% of company revenue. This segment manufactures and distributes OD pipe as well as its connectors. Any welding and fabrication needs are included here too.

Frank’s is well-diversified. In addition to having several segments of operation, the company doesn’t rely too much on any one thing. Seasonality is not an issue nor is technology.

Frank’s holds a variety of patents for the products it has developed. Those patents are important collectively, but the company does not identify any single one of those patents as more valuable than another.

Further, Frank’s has a large number of individual customers and no single one contributed more than 10% of the company’s annual revenue in 2018.

Risks of Buying Frank’s International?

Frank’s International [NYSE: FI] makes most of the products it sells. To do this, the company has to source raw materials from foundries and forge shops.

Due to the nature of Frank’s business and its products, the price of these materials can be very volatile. They fluctuate with commodity prices as well as different tariffs and duties as well as foreign exchange rates.

To further complicate matters, the raw materials that Frank’s needs are only available from a handful of suppliers, especially with regard to tubulars.

The reality means that something as simple as a steel casting can have a drastically different price from one project or purchase to the next.

To mitigate these issues as much as possible, Frank’s has worked hard to secure dependable sourcing, but every batch needs to be tested and analyzed before it can be utilized in making any components – and that adds some complexity.

There is also the fact that Frank’s is involved in the oil and gas industry. Its ability to make money depends on how active oil exploration and gas production is around the world.

Market expectations come into play as well as oil prices themselves. In order to be as successful as possible, Frank’s needs for oil and gas exploration companies to be successful in finding oil, for quality drilling projects to come available, for relative production costs to be low, the demand for oil-based energy to be high, and for the political climate to be favorable.

That is a lot of ducks to have in a row! While Frank’s doesn’t need all of that to come together, those are the factors that are going to have the biggest impact on the company’s success.

Frank’s International Stock Forecast Summary

Frank’s International [NYSE: FI] is an opportunity to invest in oil and gas without choosing a particular exploration or development company in the space.

There are risk factors involved – there always are – but Frank’s is a stable company with a long history of surmounting those circumstances.

While no investment is guaranteed, this one could be worth your time to research it further if you believe that oil and gas is a promising sector.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.