On Thursday, CFRA made an adjustment to Hess Corp 's (NYSE: HES) financial outlook. The firm's analyst has revised the stock price target downward to $145.00 from the previous $150.00 while maintaining a Hold rating on the stock.
The new target is based on a valuation multiple of 7.1 times the projected 2025 enterprise value to EBITDA, which is below the company's historical forward average. This adjustment reflects heightened regulatory risk considerations.
The firm also revised its earnings per share (EPS) estimates for Hess Corp. The 2024 EPS estimate has been reduced by $1.91 to $8.93, and the 2025 estimate has been lowered by $2.04 to $8.69.
Despite the downward revision, Hess Corp reported a third-quarter EPS of $2.14, surpassing the consensus estimate by $0.37. This beat is noteworthy as it stands against the backdrop of the revised future earnings expectations.
Hess Corp experienced a significant increase in production during the third quarter. The company reported a daily production rate of 461,000 barrels of oil equivalent (boe/d), marking a year-over-year increase of 66,000 boe/d, or approximately 17%. However, the realized price for crude oil was reported at $77.06 per barrel in the third quarter, which represents a decrease of 5.5% compared to the same period last year.
The company's operations in Guyana are a substantial contributor to its production growth. Hess Corp holds a 30% stake in the Stabroek block, where the fourth, fifth, and sixth developments are expected to commence production in 2025, 2026, and 2027, respectively. Moreover, a seventh development in the area could be approved in the near future.
Lastly, the analyst noted the ongoing legal dispute over the Guyana stake between Hess Corp's potential acquirer, Chevron Corp. (NYSE: CVX), and Exxon Mobil Corp. (NYSE: NYSE:XOM). The resolution of this matter is not anticipated until late 2025, adding an element of uncertainty to Hess Corp's outlook.
In other recent news, Chevron Corporation (NYSE:CVX) has been facing challenges, most notably the delay in the $53 billion acquisition of Hess Corporation (NYSE:HES), which is central to Chevron's growth strategy. The acquisition, which would provide Chevron with a 30% interest in a high-yield Guyana oilfield, has been stalled due to a challenge from Exxon.
Chevron's financial performance has also been under scrutiny as declining earnings have led to a reshuffle within the company's leadership. However, Chevron's head of investor relations, Jake Spiering, has expressed optimism about the company's future, indicating that Chevron is on track to deliver the highest production growth rate in the industry over the next 12 months.
On the other hand, Hess Corporation has reported better-than-expected third quarter results, with an increase in net production of 17% YoY to 461,000 barrels of oil equivalent per day. This growth, particularly in Guyana, has contributed to Hess's strong third-quarter performance, according to CEO John Hess.
Despite a decrease in realized crude oil selling prices, Hess has raised its 2024 capital expenditure forecast to $4.9 billion and announced a 14% dividend increase.
These are recent developments for both Chevron Corporation and Hess Corporation. Analysts, including Mark Kelly of MKP Advisors, have expressed concerns about Chevron's ongoing operational issues and the potential fallout if the Hess acquisition falls through.
Meanwhile, financial firm LSEG estimates a 35% decrease in Chevron's third-quarter earnings from the same period last year to $4.26 billion. The arbitration decision regarding the Hess deal, expected in the third quarter of next year, will be a critical juncture for Chevron's strategic ambitions.
InvestingPro Insights
Recent InvestingPro data provides additional context to Hess Corp's financial position and market performance. The company's market capitalization stands at $41.42 billion, with a P/E ratio of 15.72, indicating a relatively modest valuation compared to its earnings. This aligns with an InvestingPro Tip suggesting that Hess is trading at a low P/E ratio relative to its near-term earnings growth, which could be attractive to value-oriented investors.
Despite the downward revision in CFRA's price target, Hess Corp has demonstrated strong financial performance. The company's revenue growth of 14.67% over the last twelve months and a robust gross profit margin of 76.52% underscore its operational efficiency. These metrics support another InvestingPro Tip highlighting that Hess has been profitable over the last twelve months.
It's worth noting that while CFRA has adjusted its outlook, Hess Corp maintains a dividend yield of 1.49% and has increased its dividend by 14.29% over the last twelve months. An InvestingPro Tip points out that Hess has maintained dividend payments for 38 consecutive years, which may appeal to income-focused investors looking for stability in their portfolio.
For readers interested in a more comprehensive analysis, InvestingPro offers 5 additional tips and a wealth of financial metrics to further evaluate Hess Corp's investment potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.