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Truist maintains Buy on Ovintiv shares, cites solid 3Q24 outlook

EditorNatashya Angelica
Published 28/10/2024, 12:08
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On Monday, Truist Securities expressed confidence in Ovintiv Inc. (NYSE:OVV) shares, maintaining a Buy rating and a $47.00 price target on the stock. The firm anticipates a strong third quarter for 2024, highlighting the company's consistent drilling and completion (D&C) activity and improving operational efficiencies. Ovintiv's production has reportedly remained stable following its peak in the fourth quarter of 2023.

Truist Securities forecasts that Ovintiv will report significantly lower capital expenditures for the third quarter compared to previous periods. This trend of reduced spending is expected to persist into future quarters, contributing to the company's financial health. The firm estimates that Ovintiv generated nearly $400 million in free cash flow (FCF) in the last quarter.

According to Truist Securities, Ovintiv has been returning a substantial portion of its free cash flow to shareholders, with approximately 70% of the FCF paid out. The remaining cash flow has been primarily allocated towards ongoing debt repayment efforts. The firm's reiterated $47 price target suggests an approximate 20% upside for Ovintiv's stock.

Truist Securities' outlook for Ovintiv is based on the company's recent performance and strategic financial management. The firm's analysis indicates that Ovintiv is on a positive trajectory, with stable production and a strong commitment to returning value to shareholders while simultaneously reducing debt.

In other recent news, Ovintiv Inc. has been the focus of numerous analyst reports. Mizuho Securities adjusted its price target for Ovintiv to $58, maintaining an Outperform rating, while JPMorgan (NYSE:JPM) raised its target to $52, expecting a strong Q3 2024 report.

UBS has confirmed its Buy rating, and TD Cowen addressed rumors of Ovintiv potentially selling its Uinta operations for around $2 billion, maintaining its Buy rating and a $68 price target. RBC Capital reduced its price target to $61 but kept a Sector Perform rating.

Ovintiv's recent Q2 results showed net earnings of $340 million and cash flow exceeding $1 billion, surpassing estimates. The company also raised its annual production guidance, forecasting approximately $1.9 billion in free cash flow. Amid rumors of potential sales, Ovintiv has maintained a strategic focus on reducing debt and enhancing shareholder returns.

The company's management is expected to continue discussing their robust inventory, strides in capital efficiency, and a cautious approach to further asset acquisitions. This includes a potential sale of Uinta operations, although Ovintiv has not publicly confirmed this.

Analysts predict that potential transactions will be a central topic during the upcoming earnings call for the third quarter of 2024. They also anticipate improvements in Ovintiv's balance sheet in the latter half of the year. These recent developments highlight Ovintiv's ongoing efforts to improve operational efficiencies and return value to shareholders.

InvestingPro Insights

Complementing Truist Securities' optimistic outlook on Ovintiv Inc. (NYSE:OVV), recent data from InvestingPro provides additional context to the company's financial position and market performance.

Ovintiv's P/E ratio of 5.65 suggests that the stock may be undervalued relative to its earnings, aligning with Truist's view of potential upside. This is further supported by InvestingPro's fair value estimate of $51.3, which is close to Truist's $47 price target.

The company's commitment to shareholder returns, as noted by Truist, is reinforced by an InvestingPro Tip highlighting that Ovintiv has raised its dividend for 5 consecutive years. Moreover, with a current dividend yield of 2.97%, the company offers an attractive income proposition for investors.

Despite the positive outlook, it's worth noting that Ovintiv's revenue growth has been negative, with a -12.63% decline in the last twelve months. This could be a factor to watch, especially in light of Truist's expectations for lower capital expenditures and continued free cash flow generation.

For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips on Ovintiv, providing deeper insights into the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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