On Monday, JPMorgan (NYSE:JPM) updated its financial outlook for Matador Resources Company (NYSE:MTDR) shares, raising the price target to $80 from $78, while maintaining an Overweight rating on the stock.
The firm's analyst highlighted the company's operational performance and future prospects, noting that Matador's second-quarter cash flow per share (CFPS) and earnings before interest, taxes, depreciation, and amortization (EBITDA) are expected to surpass the Street's estimates.
Matador's second-quarter CFPS is projected at $4.15, compared to the Street's estimate of $4.06, and the EBITDA estimate stands at $581 million, above the Street's forecast of $554 million.
The company's oil production is anticipated to reach 94.0 thousand barrels of oil per day (MBo/d), slightly exceeding the Street's expectation of 93.5 MBo/d and the upper end of Matador's own guidance of 92.5-93.5 MBo/d.
The positive adjustment follows Matador's resolution of midstream constraints encountered in the first quarter and the anticipated contribution from the 21-well Dagger Lake project. Capital expenditures for the quarter are estimated at $398 million, aligning with the midpoint of the company's quarterly guidance.
At JPMorgan's June energy conference, Matador's management had indicated early signs of cost reductions for materials and services, which could further enhance the company's financial performance.
In addition to operational efficiencies, Matador's marketing business is expected to contribute to the company's financials, despite potential impacts from weak Waha natural gas prices. The firm estimates a $8 million marketing margin for the second quarter, following a $10 million marketing margin in the previous quarter.
Finally, the analyst forecasts Matador to generate $122 million in free cash flow (FCF) during the second quarter and projects an annual FCF of $823 million for the fiscal year 2024, which would represent an 11% FCF yield.
In other recent news, Matador Resources has been making significant strides with its recent $1.9 billion acquisition of Ameredev II, aiming to enhance its presence in the Delaware Basin.
This acquisition, expected to be completed by the third quarter of 2024, is projected to be accretive to key financial metrics, with a forward one-year Adjusted EBITDA projection of $425 to $475 million.
TD Cowen has maintained its Buy rating on Matador Resources stock, anticipating higher than previously expected production levels by fiscal year 2025. BMO Capital Markets also maintained its Outperform rating, projecting a 15% increase in cash flow per share and a 22% rise in free cash flow by 2025 due to the acquisition.
Meanwhile, Mizuho Securities has increased its price target for Matador Resources to $85, citing alignment with the company's mergers and acquisitions strategy. Truist Securities also raised its price target for Matador Resources shares to $91, emphasizing the acquisition's potential to significantly improve Matador's free cash flow.
InvestingPro Insights
In light of JPMorgan's updated financial outlook for Matador Resources Company (NYSE:MTDR), investors may find additional insights by considering key metrics and InvestingPro Tips. With a solid market capitalization of $7.73 billion and a P/E ratio that has remained attractive at 8.87 for the last twelve months as of Q1 2024, Matador Resources stands out as a robust player in its sector. The company also boasts a high gross profit margin of 80.19%, reflecting efficient operations and strong pricing power over the last twelve months.
InvestingPro Tips indicate that Matador has a history of raising its dividend, with three consecutive years of increases, showcasing a commitment to returning value to shareholders. Additionally, while some analysts have revised their earnings expectations downwards for the upcoming period, the company has been profitable over the last twelve months and is expected to maintain profitability this year. This aligns with the analyst's projection of a significant free cash flow for Matador.
For those looking to delve deeper into Matador Resources' financial health and future prospects, InvestingPro provides a wealth of further tips and detailed analysis. Explore more insights and get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription using the coupon code PRONEWS24. Discover additional InvestingPro Tips to inform your investment strategy at: https://www.investing.com/pro/MTDR.
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