LBRT: Softening Completions Market Will Pressure Shares Despite Sector Optimism

Key Takeaways

• Persistent demand for oil, gas, and power underpins stable growth and revenue prospects, supported by slow energy transition and strong end-market reliance on hydrocarbons.
  
• Advanced technology leadership and strategic alliances enhance operational efficiency, secure premium customers, and drive market share gains amid industry consolidation.
  
• Exposure to softening market conditions, energy transition risks, and delayed diversification could constrain growth and margins while raising concerns about long-term competitiveness and earnings stability.

Catalysts

Provides hydraulic fracturing services and related technologies to onshore oil and natural gas exploration, and production companies in North America.

• Increased global energy demand-particularly from data centers, industrial reshoring, and emerging markets-continues to drive robust oil & gas and power demand, underpinning enduring utilization for Liberty's core completion services and growing power solutions. This supports sustained or rising revenues and mitigates downside in down cycles.
  
• Slow progress in the energy transition and continued industry reliance on natural gas and oil, especially for industrial applications and reliable baseload power, creates stable end-markets and recurring growth opportunities for Liberty's integrated services, supporting long-term revenue visibility and potentially higher earnings quality.
  
• Liberty's leadership in next-generation technology-including its digiPrime/digiFleet natural gas-powered frac solutions and modular, low-emission power generation-is enabling market share gains, operational efficiencies, longer asset life, and stronger pricing with top-tier customers, supporting improved margins and higher free cash flow.
  
• Strategic alliances and scale investments (e.g., Oklo partnership for advanced nuclear solutions, microgrid and distributed power projects) position Liberty to capture higher-value, long-duration contracts from large-scale customers like data centers, expanding Liberty's addressable market and driving future top-line and margin growth.
  
• Industry consolidation and increasing requirements for sustainable, digital, and integrated offerings are accelerating the attrition of inferior assets and less-capable providers-favoring Liberty's technologically advanced fleets and bolstering pricing power and market share over the medium to long term, supporting expanding net margins.

Liberty Energy Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Liberty Energy's revenue will grow by 1.8% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 5.3% today to 1.0% in 3 years time.
• Analysts expect earnings to reach $41.3 million (and earnings per share of $0.32) by about September 2028, down from $216.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 70.3x on those 2028 earnings, up from 7.5x today. This future PE is greater than the current PE for the US Energy Services industry at 15.0x.
• Analysts expect the number of shares outstanding to decline by 0.89% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.15%, as per the Simply Wall St company report.

Liberty Energy Future Earnings Per Share Growth

Risks

• The company anticipates a softening in completions activity and service pricing headwinds in the second half of 2025, driven by declining rig counts, customer activity reductions, and increased market white space; this is likely to place downward pressure on both revenue and EBITDA.
  
• Management signaled a retrenchment to maintenance-only CapEx in 2026 for its core completion business, as outlook for expansion of next-generation fleets like digiFleet is on hold unless market conditions improve, indicating potentially stagnant or declining earnings growth.
  
• Heavier reliance on North American hydraulic fracturing and sand operations exposes Liberty Energy to structural demand risks from ongoing energy transition trends, increasing regulatory pressures, and potential long-term declines in oil and gas service demand, all of which could constrain revenue and net margins over the next decade.
  
• Upcoming large-scale power generation and strategic partnerships (e.g., with Oklo) may have long lead times before revenue contribution-potentially not materializing until 2027-2030 for nuclear-related projects-creating a revenue gap as the traditional oilfield business softens.
  
• The company faces input and equipment cost inflation, slower capital equipment delivery from vendors, and possible technological catch-up requirements in automation and emissions reduction compared to larger, diversified peers; these trends could compress margins and erode long-term competitiveness and earnings power.

Valuation

• The analysts have a consensus price target of $14.607 for Liberty Energy 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 $19.0, and the most bearish reporting a price target of just $10.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.3 billion, earnings will come to $41.3 million, and it would be trading on a PE ratio of 70.3x, assuming you use a discount rate of 8.1%.
• Given the current share price of $10.02, the analyst price target of $14.61 is 31.4% 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.