Liberty Energy Stock Plunges 41% in Six Months: Time to Hold or Sell?

Liberty Energy Inc.’s LBRT shares have plunged 40.9% over the past six months. This decline not only contrasts with the broader oil and energy sector's 3.6% gain but also significantly undercuts the 10.2% drop in the oil and gas field services sub-industry. The gap appears even more striking when compared to its peers — Oceaneering International OII fell a more modest 19.4%, while TechnipFMC plc (FTI) and Subsea 7 S.A. SUBCY rose 19.3% and 22%, respectively. Such a steep and isolated decline suggests that LBRT is likely grappling with internal challenges that go beyond broader industry trends.

Stock Price Changes Over the Past Six Months

What Does Liberty Energy Do?

This Denver, CO-based oil and gas equipment and services company primarily offers hydraulic fracturing services and related technologies to onshore oil and gas producers across North America. Its core operations include managing around 40 active frac spreads to extract hydrocarbons from shale formations. Beyond fracturing, LBRT provides complementary services such as wireline operations, proppant delivery (from its own Permian Basin sand mines), well site fueling and logistics, field gas processing, compressed natural gas (CNG) delivery, and data analytics to optimize well performance. These diversified offerings aim to generate multiple revenue streams, yet the recent steep share price drop raises questions about the company’s near-term outlook.

Key Drivers Behind Liberty Energy's Underperformance

Declining Net Income and Profitability: LBRT’s net income was $20 million for first-quarter 2025 compared with $82 million a year ago, representing a 75.4% year-over-year decline. Adjusted net income also plummeted to $7 million from $82 million in first-quarter 2024. This sharp decline highlights weakening profitability, caused by pricing pressures and higher operational costs. Investors may question the sustainability of margins amid ongoing market challenges. In contrast, companies like Oceaneering International have managed to control costs and maintain profitability in their subsea operations, which helped cushion their performance. 

Exposure to Tariff and Macroeconomic Risks: LBRT’s management acknowledged that tariff announcements and OPEC+ production strategies are creating uncertainty in the energy sector. While Liberty Energy has begun mitigation efforts, tariffs could inflate costs for imported equipment components, further squeezing margins. The company’s reliance on global supply chains makes it vulnerable to geopolitical tensions and trade policy shifts, which could disrupt operations or increase expenses unpredictably. Similarly, TechnipFMC leverages its multinational footprint to balance regional risk exposure and maintain operational resilience. Oceaneering International has taken a proactive approach by locking in long-term service contracts that shield its subsea division from some external shocks.

Volatility in Commodity Prices: Liberty Energy’s performance is tightly linked to oil and gas prices, which remain highly volatile. CEO Ron Gusek noted that sustained low oil prices (e.g., $60/barrel) could lead to reduced activity from smaller producers, while a drop below $60 might trigger broader pullbacks. With WTI prices fluctuating, LBRT’s revenues and profitability may face risks, especially if demand for frac services weakens. On the other hand, TechnipFMC is less susceptible to short-term commodity fluctuations due to its multi-year offshore project backlog.

High Capital Expenditures and Debt Levels: Liberty Energy’s capital expenditures (CapEx) totaled $121 million in first-quarter 2025, with plans to spend $450 million on completions and $200 million on power assets in 2025. The company’s net debt rose to $186 million, and liquidity totaled $164 million, raising concerns about financial flexibility. High CapEx could strain cash flows, especially if demand softens, limiting shareholder returns.In comparison, Oceaneering International has maintained disciplined capital spending, focusing investments on core subsea technologies and avoiding overleveraging.

Dependence on North American Market: LBRT’s operations are concentrated in North America, making it susceptible to regional downturns. While natural gas demand rises, oil-focused activity could decline if OPEC+ adjusts production, affecting Liberty Energy’s frac fleet utilization. The lack of geographic diversification amplifies risks if the North American market weakens.By contrast, Subsea 7’s geographic reach spans multiple continents, which allows it to balance exposure and adapt to local dynamics. TechnipFMC, with project wins in Brazil, the Middle East, and the North Sea, showcases the value of geographic diversification. Oceaneering International operates in over 30 countries, reinforcing its ability to hedge against localized downturns.

Pricing Pressure in Frac Services: Despite a "flight to quality," LBRT faces pricing headwinds in its core frac business. CEO Gusek admitted that 2025 pricing reset is "modestly lower," and customers may resist further cuts. Competitive pressures and oversupply in the frac market could erode margins, particularly if activity slows.

Unproven Power Business Expansion: Liberty Energy’s acquisition of IMG Energy Solutions and push into distributed power systems bear execution risks. While management is optimistic, the power business is unproven at scale, and project timelines (e.g., first-quarter 2026 operations) are lengthy. Investors may doubt whether this segment can offset weakness in traditional frac services.Meanwhile, Oceaneering International continues to focus on its core subsea competencies, avoiding risky diversification.

Share Buybacks Amid Uncertainty: LBRT repurchased $24 million in shares in the first quarter but signaled caution due to macroeconomic risks. CFO Michael Stock emphasized prioritizing balance sheet strength over buybacks, suggesting limited near-term support for the stock. The remaining $270 million authorization may not be deployed aggressively if conditions worsen.In contrast, Subsea 7 has remained conservative with capital returns, prioritizing long-term sustainability.

Lower Adjusted EBITDA and ROCE: Liberty Energy’s adjusted EBITDA fell 31% year over year to $168 million in the first quarter, reflecting operational challenges. While ROCE improved to 12%, this metric remains sensitive to commodity prices and demand. Declining EBITDA margins could signal eroding competitive advantages.

Customer Concentration Risks: Liberty Energy’s revenues depend on a limited number of large E&P customers. Any reduction in their spending, due to oil price drops or capital discipline, could disproportionately impact the company. LBRT’s outlook hinges on customer activity, which is uncertain.In comparison, Oceaneering International and Subsea 7 have broader customer bases across multiple subsea and offshore markets, which helps diversify revenue streams.

Bottom Line: Avoid LBRT Stock at Present

This Zacks Rank #4 (Sell) company faces multiple headwinds that may justify a bearish stance. The company reported a steep 76% year-over-year drop in net income in first-quarter 2025, raising concerns about declining profitability amid pricing pressure and higher costs. Its heavy reliance on North American markets and volatile oil prices make revenues unpredictable, particularly if WTI dips below $60/barrel. High capital expenditures and rising debt levels strain financial flexibility, especially as demand softens. Meanwhile, exposure to tariffs, macroeconomic uncertainty and customer concentration further amplify operational risks. Lastly, Liberty Energy's shift to distributed power holds execution challenges, and near-term benefits remain unproven, limiting confidence in diversification efforts.

Unless the company shows improved financial results and greater operational stability, investors may be better off exploring other opportunities in the oil and gas sector.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

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This article originally published on Zacks Investment Research (zacks.com).

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