Wednesday, Mizuho has updated its stock price target for Expand Energy (NASDAQ: EXE), increasing it to $110 from the previous $105, while keeping an Outperform rating on the stock. This adjustment follows Expand Energy's release of a preliminary capital plan that has been positively received by the market.
The company's preliminary 2025 capital expenditure (capex) forecast is approximately $2.7 billion, which includes $200-300 million in non-drilling and completion (D&C) expenses. This projection falls around 11% to 12% below what Mizuho Securities USA and other market analysts had anticipated.
Furthermore, Expand Energy's forecasted production for fiscal year 2025 of about 7.0 billion cubic feet equivalent per day (bcfe/d) is roughly 1% to 8% higher than Mizuho Securities USA and consensus estimates.
Analysts at Mizuho estimate that Expand Energy's free cash flow (FCF) in 2025 will reach $1.6 billion, assuming a natural gas price of $3.50 per thousand cubic feet (mcf) on the New York Mercantile Exchange (Nymex). This figure is approximately 12% higher than Mizuho's previous estimates and around 50% above the consensus among analysts.
In addition to these financial forecasts, Expand Energy has introduced a new cash return framework that aims to strike a balance between reducing debt and providing systematic cash returns to shareholders. The framework also aims to preserve the company's base dividend yield, which is currently around 4.2%.
As part of its recent strategic developments, Expand Energy has increased its target for anticipated synergies following a deal by about 25% to $500 million. The majority of these new savings are expected to come from reductions in capital expenditures. Mizuho views these updates as positive steps for the company, leading to the raised net asset value (NAV)-based price target.
In other recent news, Expand Energy's third-quarter financial results surpassed consensus estimates, with earnings before interest, taxes, depreciation, and amortization (EBITDA) and cash flow per share (CFPS) exceeding expectations by 2% and 3%, respectively.
Capital expenditures were also reported to be 6% lower than anticipated. The company's fourth-quarter production and capital expenditure guidance matched analyst predictions, with a slight 1% decrease in capital expenditure.
Recent developments also include the company's acquisition of SWN, which is expected to generate annual synergies of $500 million by 2027, an increase from the previous estimate. Expand Energy has also introduced a capital returns program and a $1 billion share buyback program.
Analyst firms, Stephens, and BofA Securities have provided their insights on Expand Energy. Stephens raised the company's price target to $86, while BofA Securities initiated coverage with a Buy rating and a price target of $114.
In other developments, Expand Energy, previously known as Chesapeake, has increased its presence in the natural gas market, accounting for approximately 11-12% of the total U.S. natural gas supply. This strategic shift was highlighted by the Southwestern merger-of-equals.
Finally, amid 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
Expand Energy's recent strategic moves align with several key insights from InvestingPro. The company's strong return over the last five years, as highlighted by InvestingPro Tips, supports Mizuho's positive outlook and increased price target. Moreover, the fact that Expand Energy operates with a moderate level of debt is particularly relevant given the company's new cash return framework, which aims to balance debt reduction with shareholder returns.
InvestingPro Data shows that Expand Energy's market capitalization stands at $11.25 billion, with a P/E ratio of 25.56. This valuation metric, combined with the company's dividend yield of 2.85%, provides context to the company's financial position and shareholder return potential.
It's worth noting that InvestingPro offers 8 additional tips for Expand Energy, providing investors with a more comprehensive analysis of the company's prospects. Those interested in a deeper dive into Expand Energy's financial health and market position may find value in exploring these additional insights on the InvestingPro platform.
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