Tenaris Guides to 10% Sequential Revenue Rise and 25% EBITDA Margin

Tenaris (NYSE:TS) expects fourth-quarter revenue to rise by close to 10% sequentially, with an EBITDA margin of around 25%, after a third quarter that beat management's own forecasts. For finance teams watching the tubular supply chain, the guidance signals pricing momentum in U.S. oil country tubular goods (OCTG — the casing and tubing used in oil and gas wells) that will carry into 2027.

Third-quarter sales reached $3.1 billion, up 4% year over year and 5% from the second quarter. Higher North American demand and increased shipments to Middle East customers drove the sequential improvement, the company said on its earnings call.

EBITDA (earnings before interest, taxes, depreciation and amortization) rose 16% sequentially to $756 million, at a 24% margin. The company credited a favorable product mix, efficient industrial performance and the postponement of maintenance at some facilities, despite higher raw material, energy and logistics costs.

"Our third quarter results were better than we had expected," CEO Gabriel Podskubka said. He noted Tenaris completed delayed Gulf shipments it had not anticipated and deferred some maintenance into next year.

What drives the fourth-quarter guidance?

Podskubka said the expected revenue increase would come mostly from volume growth across most markets. Higher sales of welded large-diameter pipeline products, which carry lower average prices than seamless tubulars, will partly offset positive pricing trends for seamless products.

He also expects revenue to rise again in the first quarter of 2027, supported by additional volume and existing orders in markets with long lead times, including offshore and the Middle East. He cautioned that geopolitical conditions and other variables made precise guidance premature.

Asked whether EBITDA margins staying above 25% in early 2027 was a reasonable expectation, Podskubka called the assessment "a very fair assumption" based on current conditions, while noting conditions could change.

How strong is U.S. pricing?

Higher drilling activity and production costs are pushing up U.S. OCTG prices as inventories draw down, and Tenaris is raising production in its domestic system to meet demand.

Guillermo Moreno, president of U.S. operations, said U.S. OCTG demand had risen by around 15% since the beginning of the Middle East conflict, with Tenaris sales growing in line with that increase. He expects additional growth in the fourth quarter, then broadly flat demand at current levels.

Moreno said the Pipe Logix price index (a benchmark for U.S. OCTG pricing) rose around 8% to 9% in the third quarter and another 6% in October. Those increases should reach Tenaris revenue in the fourth quarter and first quarter of 2027. Firm demand, below-standard inventory levels, rising costs and antidumping margins support short-term pricing, with room for further increases.

What is the outlook for the Middle East?

Fourth-quarter and first-quarter activity should look similar to the third quarter rather than a full recovery. Shipments to parts of the Gulf remain constrained by logistics, and Tenaris is not currently shipping pipe associated with LNG demand in Qatar. Drilling activity in Saudi Arabia and the United Arab Emirates has remained resilient.

Where are the growth projects?

Podskubka identified Argentina and offshore projects as potential growth drivers:

• 42 rigs now operate in Argentina's Vaca Muerta shale region, up from about 32 a year earlier, with 48 projected by mid-2027.
• Tenaris will start a third fracturing services unit in Argentina in early 2027 and has won two pipeline projects for first-half delivery.
• In Venezuela, Tenaris secured a long-term OCTG supply contract with Rig Direct services (a model where the manufacturer delivers pipe directly to the drilling site) for Chevron, plus a pipe supply contract for Eni's initial 20-well program.
• Venezuelan revenue should reach approximately $60 million in 2026, with growth in 2027 from a low starting point.
• Offshore pipeline deliveries should increase in the fourth quarter and into 2027 as Mediterranean and Suriname projects advance, including an Eni award for OCTG, pipe and coating for the Cronos offshore project in Cyprus.

What happens to costs and tariffs?

CFO Carlos Gómez Álzaga said higher raw material prices will keep flowing through inventory into fourth-quarter costs. He expects scrap and ferroalloy costs to level out in the first half of 2027, while some effects from European energy and hot-rolled coil costs persist.

U.S. tariffs currently run at approximately $140 million to $150 million per quarter because of increased volume, Podskubka said. The full effect will appear in costs in the first half of 2027 as inventory is sold.

What does the balance sheet allow?

Third-quarter operating cash flow came in at $366 million, capital expenditures at $98 million and free cash flow at $168 million. The net cash position rose to $3.8 billion at quarter-end, while working capital increased by $270 million.

Gómez Álzaga guided to capital spending of around $600 million in 2027. Capacity initiatives include a $230 million Canadian program, the Artrom acquisition — which has received unconditional European Union competition clearance — and an ongoing U.S. investment program.

On dividends and any change to the payment schedule, Podskubka said those decisions rest with the board. The improving outlook and cash generation will be considered, but he offered no commitment and pointed to February for a potential update.