On Monday, Wells Fargo (NYSE:WFC) adjusted its outlook on Crescent Energy (NYSE:CRGY), raising the stock's price target to $20 from the previous $19 while maintaining an Overweight rating. The revision reflects the firm's latest evaluation of Crescent Energy's production, operating costs, and price realization expectations.
The update came with a lower Q1 earnings per share (EPS) estimate due to reduced oil production and weaker gas price realizations.
Wells Fargo now anticipates Crescent Energy's Q1 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), EPS, free cash flow (FCF), and capital expenditure (Capex) to be $292 million, $0.34, $54 million, and $192 million, respectively. These figures contrast with the consensus estimates which are set at $274 million for adjusted EBITDA, $0.24 for EPS, $51 million for FCF, and $180 million for Capex.
The financial institution's analysis is based on its price deck, which projects an average West Texas Intermediate (WTI) crude oil price of $75.74 per barrel and Henry Hub (HH) natural gas price of $2.44 per thousand cubic feet for the year 2024. Using these price assumptions, Wells Fargo forecasts Crescent Energy to generate approximately $450 million in free cash flow for the full year 2024.
This outlook provides investors with updated projections that may influence their view of Crescent Energy's financial performance in the near term. The Overweight rating indicates that Wells Fargo views the stock as likely to outperform the average return of the stocks the analyst covers over the next 6-12 months.
The price target increase suggests that Wells Fargo sees potential for Crescent Energy's share value to grow, based on the anticipated financial metrics and market conditions projected for the upcoming quarters.
InvestingPro Insights
As Crescent Energy (NYSE:CRGY) navigates the challenges of fluctuating oil production and gas price realizations, InvestingPro data provides a deeper look into the company's financial health and market performance. With a market capitalization of $1.22 billion and a Price to Earnings (P/E) ratio of 10.63, Crescent Energy's valuation appears reasonable in the current market climate. However, it's worth noting that the adjusted P/E ratio for the last twelve months as of Q4 2023 stands at a higher 17.58, which could suggest an increased investor expectation for future earnings.
InvestingPro Tips indicate that while analysts predict Crescent Energy will be profitable this year, there are concerns regarding the company's cash burn rate and the balance between short term obligations and liquid assets. The company's profitability over the last twelve months is a positive sign, yet two analysts have revised their earnings downwards for the upcoming period, signaling potential headwinds.
For investors considering Crescent Energy's stock, it's important to weigh these factors alongside Wells Fargo's revised price target and Overweight rating. The company's revenue growth has seen a decline of -22.06% over the last twelve months as of Q4 2023, which may be a point of consideration when assessing the stock's future trajectory. Furthermore, with a dividend yield of 4.38% as of the latest data, Crescent Energy may appeal to income-focused investors.
For those looking for more comprehensive analysis and additional insights, InvestingPro offers a range of tips on Crescent Energy's financials and market performance. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to exclusive data and expert opinions. Currently, there are 6 additional tips available on InvestingPro that could further inform investment decisions.
As the next earnings date approaches on May 8, 2024, investors will be closely monitoring Crescent Energy's financial results and market dynamics to better understand the company's position and future prospects.
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