Offshore Demand And Mergers Will Drive Utilization Momentum Next Year

Key Takeaways

• Persistent vessel supply constraints and robust offshore project demand position Tidewater for higher utilization, stronger pricing, and sustained revenue and margin growth.
  
• Continued fleet modernization, operational discipline, and a strong balance sheet set the stage for opportunistic expansion and structurally higher profitability.
  
• Heavy dependence on cyclical offshore markets, execution risks in acquisitions, and limited diversification expose Tidewater to revenue volatility and long-term competitiveness challenges.

Catalysts

Provides offshore support vessels and marine support services to the offshore energy industry through the operation of a fleet of offshore marine service vessels worldwide.

• Tight vessel supply due to minimal newbuild activity and expected attrition of older vessels is likely to constrain global OSV fleet growth through at least 2027, positioning Tidewater for higher utilization and improved day rates as offshore E&P and construction projects ramp up-catalyst for sustained revenue growth and margin expansion.
  
• Multi-year offshore project pipeline-particularly in deepwater regions such as Africa, Brazil, the Caribbean, and Asia Pacific-remains robust, underpinned by the world's rising energy demand and depletion of onshore reserves, supporting increased demand for Tidewater's fleet and driving top-line and cash flow growth from 2026 onward.
  
• Fleet modernization and disciplined operational execution have delivered three consecutive quarters of 50%+ gross margin, underpinning the expectation of structurally higher operating margins and net earnings as the company benefits from lower repair/maintenance costs and higher reliability.
  
• Tidewater's strong balance sheet and new flexible capital structure enable opportunistic M&A during cyclical downturns, allowing for value-accretive fleet expansion in a consolidating industry, which over time can boost both revenues and earnings power.
  
• Persistent underinvestment in new OSV capacity-combined with anticipated growth in offshore subsea and production activity-creates an environment ripe for future day rate inflection as project activity intensifies, setting the stage for renewed earnings and free cash flow acceleration by late 2026 and into 2027.

Tidewater Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Tidewater's revenue will grow by 3.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 14.6% today to 20.2% in 3 years time.
• Analysts expect earnings to reach $306.5 million (and earnings per share of $6.61) by about September 2028, up from $198.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $353 million in earnings, and the most bearish expecting $253 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.4x on those 2028 earnings, down from 14.5x today. This future PE is lower than the current PE for the US Energy Services industry at 15.0x.
• Analysts expect the number of shares outstanding to decline by 5.41% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.92%, as per the Simply Wall St company report.

Tidewater Future Earnings Per Share Growth

Risks

• Persistent near-term softness in global offshore demand, especially a lack of urgency by customers to commence committed capital expenditures and pauses in drilling campaigns in Africa, increases the risk of prolonged vessel idleness, which could pressure Tidewater's future revenues and compress net margins during industry downcycles.
  
• Reliance on growth through M&A and capital deployment for vessel acquisitions creates execution risk; if suitable acquisitions are unavailable or overvalued, or if integration fails to deliver anticipated synergies, Tidewater could deploy capital less efficiently than anticipated, negatively impacting earnings growth.
  
• The offshore sector's cyclical nature combined with region-specific volatility-such as geopolitical conflict in the Eastern Mediterranean, ongoing payment issues with customers (e.g., in Mexico), and uncertain project timelines in key markets-could lead to unplanned downtime, higher costs, and increased revenue volatility.
  
• The company's long-term performance remains highly exposed to fossil fuel markets, and any acceleration in global energy transition policies, ESG-driven capital constraints, or stringent environmental regulation could reduce offshore activity over time-shrinking addressable markets and ultimately limiting Tidewater's revenue and cash flow growth.
  
• Tidewater's largely undiversified exposure to offshore support vessels, combined with potential technological disruptions (like subsea robotics and automation), poses a risk to long-term competitiveness and may erode the company's future earnings and margin profile if new technologies reduce demand for traditional OSVs.

Valuation

• The analysts have a consensus price target of $61.667 for Tidewater 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 $70.0, and the most bearish reporting a price target of just $35.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $306.5 million, and it would be trading on a PE ratio of 10.4x, assuming you use a discount rate of 7.9%.
• Given the current share price of $58.32, the analyst price target of $61.67 is 5.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.