On Tuesday, JPMorgan (NYSE:JPM) analyst Arun Jayaram increased the price target for Coterra Energy (NYSE:CTRA) to $34 from $33, while keeping an Overweight rating on the stock. Currently trading at $25.04, the company has received strong analyst support, with InvestingPro data showing 8 analysts recently revising their earnings estimates upward. The stock's analyst price targets range from $27 to $40, suggesting significant potential upside. Jayaram's assessment highlights Coterra Energy's substantial gains in capital efficiency over the past two years, which have been attributed to better-than-expected well productivity and advancements in reducing cycle times. This progress has resulted in nine consecutive quarters of oil production surpassing the upper range of the company's quarterly guidance.
Coterra Energy's guidance is designed to be achievable, reflecting the improvements in well productivity and cycle times. With the recent acquisitions of Avant and Franklin Mountain assets, which were finalized in late January, and the guidance issued on February 24, Jayaram anticipates oil production to be slightly above the midpoint of the company's first-quarter guidance range, albeit 2% below the Street estimate (STe). According to InvestingPro analysis, the company maintains a strong financial position with a current ratio of 2.92x and operates with a moderate debt-to-equity ratio of 0.29, providing flexibility for future growth initiatives.
The company's recent communications suggest that Coterra Energy has effectively lowered costs on the newly acquired assets through optimized completion designs, which have achieved cost reductions without compromising well productivity. Additionally, the company has made strides in reducing cycle times for these assets, and further updates from management are expected in the first-quarter earnings call.
In terms of financial estimates, Jayaram's projections for the first quarter of 2025 are aligned with the Street's estimates, with cash flow per share (CFPS) at $1.53 and earnings before interest, taxes, depreciation, amortization, and exploration expenses (EBITDAX) at $1,356 million. Oil production is estimated at 104.3 thousand barrels of oil per day (MBo/d), just above the midpoint of Coterra's guidance but 2% below the STe of 143.4 MBo/d. The total production estimate is slightly lower than the STe at 731.9 thousand barrels of oil equivalent per day (MBoe/d) compared to 736.8 MBoe/d. Capital expenditure (capex) for the quarter is projected to be $572 million, generating free cash flow (FCF) of $581 million.
Coterra is expected to repurchase $110 million in shares during the first quarter, with cash returns estimated at 46% of the quarterly FCF. While the company aims to return over 50% of FCF to shareholders, the focus in the near term is on debt reduction following the Delaware Basin acquisitions. The cash return for the full year 2025 is anticipated to be more weighted towards the second half of the year.
For the full year 2025, Jayaram forecasts oil production of 162.7 MBo/d driven by $2.26 billion in capex, compared to the STe's projection of 163.2 MBo/d and $2.25 billion in capex. Following model updates for recent strip pricing and updated type curves, JPMorgan reaffirms its Overweight rating and raises the December 2025 price target for Coterra Energy to $34, based on the stock trading at 90% of the firm's blended net asset value (NAV). Notably, InvestingPro analysis indicates that Coterra is currently undervalued, with additional metrics showing a 36-year track record of consistent dividend payments and a healthy 3.51% dividend yield. For comprehensive analysis of Coterra's valuation and future prospects, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Coterra Energy reported its fourth-quarter 2024 earnings, surpassing analysts' expectations with an adjusted earnings per share of $0.49, compared to the forecast of $0.43. The company's revenue aligned with projections, reaching $1.4 billion. Additionally, Coterra Energy's oil production increased by 13% year-over-year, while capital costs decreased by 16% from the previous year. Raymond (NSE:RYMD) James adjusted its price target for Coterra Energy to $37.00, down from $41.00, while maintaining an Outperform rating, noting the company's strong production performance and lower capital expenditure. Meanwhile, JPMorgan raised its price target for Coterra Energy to $36.00 from $35.00, retaining an Overweight rating, citing the company's substantial oil and gas volume and capital efficiency. UBS also maintained a Buy rating for Coterra Energy with a price target of $37.00, highlighting the company's operational efficiency and strategic positioning. These developments reflect a positive outlook for Coterra Energy's future performance, as the company continues to adapt its strategies to the evolving energy market.
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