An industry analyst from Evercore ISI maintained a positive stance on Viper Energy (NASDAQ: NASDAQ:VNOM), reiterating an Outperform rating and a $45.00 price target.
The analyst highlighted Viper Energy's recent strategic moves, including a $1 billion acquisition deal with DoubleEagle's minerals segment, which is seen as highly beneficial.
The transaction is viewed as accretive, meaning it is expected to add to the company's earnings. Viper Energy is said to be acquiring assets at valuations that are favorable when compared to its own trading multiples.
According to the analyst, the purchase price is approximately 9 times forward earnings for 2025 and below 7 times for 2026, based on current projections. This is notably lower than Viper Energy's current trading multiple of around 12 times enterprise value to EBITDA.
The deal is also anticipated to support Viper Energy's organic oil growth, with a compound annual growth rate (CAGR) of 10% projected over the next two years.
The growth estimate does not include the potential positive impact from an expected drop-down transaction with Eagle Energy Resources (EER) slated for early next year.
The analyst's report further delves into Viper Energy's operational outlook, providing a detailed analysis of the company's updated financial model. It also examines how the new oil volume guidance integrates into the company's overall strategy.
The report includes a reference to the Fasken Ranch Operator Map, which is presented in the deal deck and demonstrates the effectiveness of the company's recent efforts to consolidate its operational areas.
Viper Energy's strategic acquisition is part of its broader plan to enhance shareholder value and strengthen its position in the energy sector.
InvestingPro Insights
Recent analysis from InvestingPro provides additional insights into Viper Energy's (NASDAQ:VNOM) financial health and market performance. According to InvestingPro data, Viper Energy boasts a market capitalization of around $7.67 billion, with a P/E ratio of 15.26, suggesting that the stock is trading at a low price relative to its near-term earnings growth. This aligns with the Evercore ISI analyst's view that Viper Energy's acquisition deal is being made at favorable valuations. Furthermore, the company's liquid assets surpass its short-term obligations, indicating a solid liquidity position that can support strategic moves like the recent acquisition.
The data also shows a robust revenue growth of 21.87% over the last twelve months as of Q2 2024, underpinning the company's strong operational performance. Viper Energy's three-month price total return stands at 17.39%, reflecting a positive market sentiment and aligning with the analyst's optimistic outlook. For investors seeking additional insights, there are more InvestingPro Tips available, including the fact that analysts predict the company will be profitable this year and that Viper Energy operates with a moderate level of debt. To explore these further, investors can find additional tips at InvestingPro's dedicated page for Viper Energy.
The company's next earnings date is slated for November 4, 2024, and with a dividend yield of 5.65%, shareholders have an attractive income component to consider. As Viper Energy navigates the dynamic energy market, these InvestingPro metrics and tips provide a deeper understanding of the company's financial standing and market potential.
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