Forum Energy Technologies: Leveraging Free Cash Flow and a Robust Backlog to Drive Shareholder Value in a Volatile Energy Market

Forum Energy Technologies (FET) has long been a standout in the energy equipment sector, but its Q2 2025 earnings report and revised guidance underscore a compelling narrative for investors seeking high-yield opportunities. With a decade-high backlog, resilient EBITDA, and a disciplined capital return framework, FET is positioning itself as a rare combination of defensive strength and offensive growth potential in a sector grappling with macroeconomic headwinds.

Free Cash Flow Generation: A Catalyst for Shareholder Value

FET's Q2 2025 results highlight its ability to generate consistent free cash flow despite industry-wide volatility. The company reported $23 million in free cash flow for the quarter, bringing its eight-quarter total to $168 million. This performance has enabled FET to raise its full-year free cash flow guidance to $60–80 million, a 20% increase from prior expectations. With a free cash flow yield of approximately 30% as of August 6, 2025, FET offers one of the most attractive valuations in the energy equipment space.

The company's capital return framework has been a key driver of this value creation. In the first half of 2025 alone, FET repurchased 579,000 shares for $11 million, with plans to repurchase an additional 10% of its shares by year-end. This aggressive buyback strategy, coupled with a net leverage reduction target of 1.3x, signals management's confidence in the company's liquidity and operational efficiency. For investors, this translates to a dual benefit: immediate share price appreciation through buybacks and long-term stability via debt reduction.

EBITDA Resilience and Strategic Backlog

FET's adjusted EBITDA of $21 million in Q2 2025, up 2% sequentially, demonstrates its ability to maintain profitability even in a slowing energy market. The Artificial Lift and Downhole segment, which reported a 24% increase in adjusted EBITDA to $17 million, has been a standout performer, driven by favorable product mix and cost discipline. Meanwhile, the Drilling and Completions segment, though facing margin pressures due to an unfavorable product mix, saw a 35% surge in orders, largely from offshore defense systems and coiled tubing projects.

The company's total backlog, now at a decade-high, is a critical tailwind. With $85 million in orders for the Artificial Lift and Downhole segment and $178 million for Drilling and Completions, FET is well-positioned to meet its full-year adjusted EBITDA target of $85 million. This backlog provides a buffer against near-term industry downturns and ensures a steady revenue stream for 2026.

Why FET is a High-Yield Energy Investment

FET's strategic use of free cash flow and its capital return framework make it a compelling high-yield investment. While many energy equipment firms struggle with declining activity levels, FET's backlog and cost-saving initiatives are insulating it from macroeconomic risks. The company's operating cash flow of $25.1 million over the first half of 2025, combined with a $39 million cash balance, further strengthens its financial flexibility.

For investors, the key takeaway is clear: FET's disciplined approach to capital allocation and its focus on high-margin segments position it to outperform in both upturns and downturns. The company's 30% free cash flow yield, coupled with a robust backlog and aggressive buybacks, creates a flywheel effect—generating returns while fortifying its balance sheet. Historically, FET's stock has shown a positive trend following earnings releases, with a 53.85% win rate over three days and a 76.92% win rate over ten days since 2022. This historical performance underscores the stock's potential to deliver consistent returns in the short to medium term.

Investment Thesis

Forum Energy Technologies is undervalued relative to its cash flow generation and growth prospects. With a revised full-year free cash flow target of $60–80 million and a capital return framework that prioritizes shareholder value, FET offers a rare combination of yield and upside potential. Investors should consider adding FET to their portfolios as a hedge against energy market volatility and a catalyst for long-term gains.

In a sector where many players are overleveraged or dependent on cyclical demand, FET's strategic discipline and backlog-driven resilience make it a standout. As the company continues to execute on its leverage reduction and buyback plans, the path to unlocking shareholder value has never been clearer.