On Wednesday, Stephens made a modest adjustment to Expand Energy's (NASDAQ:EXE) stock price target, increasing it to $86.00 from the previous $85.00, while maintaining an Equal Weight rating on the stock.
The change follows the company's third-quarter financial performance, which showed earnings before interest, taxes, depreciation, and amortization (EBITDA) and cash flow per share (CFPS) surpassing consensus estimates by 2% and 3%, respectively. Moreover, capital expenditures (capex) were reported to be 6% lower than anticipated.
Expand Energy's fourth-quarter production and capex guidance matched analysts' expectations, with a slight 1% decrease in capex. Looking ahead to 2025, the company's preliminary production and capex guidance aligns with current projections, with capex expected to be 12% lower.
This forecast accounts for a decrease in activity and the planned activation of 80 deferred turn-in-lines (TILs), which have a short-cycle capacity of 1.0 billion cubic feet per day, along with 60 drilled but uncompleted wells (DUCs) that can be activated at an estimated cost of around $300 million.
The company also announced an increase in the expected annual synergies following its acquisition of SWN, raising the figure to $500 million by the end of 2027. This includes an additional $100 million in identified savings.
Expand Energy has introduced an enhanced capital returns program that upholds the current base dividend and proposes to distribute 75% of the remaining free cash flow (FCF) through a combination of a variable dividend and stock repurchases. Supporting this plan is a newly authorized $1 billion share buyback program.
Credit rating agencies have responded positively to Expand Energy's financial strategies, with both S&P and Fitch assigning an investment-grade rating to the company's debt. Moody's (NYSE:MCO) has also expressed a positive outlook. Reflecting these developments, the analyst has slightly revised the net asset value (NAV) per share and updated the target price to the new $86 mark.
In other recent news, Expand Energy, previously known as Chesapeake, has been making significant strides in the natural gas market. BofA Securities initiated coverage on the company, assigning a Buy rating and projecting an agile response to robust winter demand.
The firm emphasized the company's strategic shift towards natural gas, highlighted by the Southwestern merger-of-equals. Expand Energy now accounts for approximately 11-12% of the total U.S. natural gas supply, positioning it as a key player in the sector.
Stephens also adjusted its valuation of Expand Energy, raising its stock price target to $85 while maintaining an equal weight rating. This move followed an analysis of the company's third-quarter performance, which showed a 5% decrease in production due to a strategy of building drilled but uncompleted wells and deferring new well production.
Mizuho Securities maintained its Outperform rating on Expand Energy, with expectations that the company's 2025 plan will be influenced by natural gas market conditions. The firm anticipates that strategic deployment of deferred wells could increase production volumes by about 5% with roughly 8% less capital expenditure.
In the wake of these developments, several U.S. and Canadian companies, including Chesapeake Energy (NYSE:CHK), have been undergoing significant workforce reductions due to economic uncertainty. Chesapeake Energy reported a Q2 net loss of $227 million, attributed to weak prices for natural gas.
InvestingPro Insights
Recent data from InvestingPro adds depth to Stephens' analysis of Expand Energy (NASDAQ:EXE). The company's market capitalization stands at $11.25 billion, with a P/E ratio of 25.56, suggesting a moderate valuation relative to earnings. This aligns with Stephens' Equal Weight rating and the modest price target increase.
InvestingPro Tips highlight that Expand Energy operates with a moderate level of debt and maintains liquid assets that exceed short-term obligations. These factors support the company's financial stability and its ability to implement the enhanced capital returns program mentioned in the article.
The stock's low price volatility, as noted by InvestingPro, may be attractive to investors seeking stability, particularly in light of the company's dividend yield of 2.85%. This yield, combined with the announced share buyback program, reinforces Expand Energy's commitment to shareholder returns.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Expand Energy, providing a broader perspective on the company's financial health and market position.
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