On Thursday, JPMorgan (NYSE:JPM) adjusted its price target for Coterra Energy (NYSE:CTRA), increasing it to $30 from the previous $29, while reiterating an Overweight rating on the stock. The firm anticipates another strong operational quarter from Coterra in the Delaware Basin, with first-quarter oil volumes expected to be at the higher end of the guidance range.
Coterra Energy may have postponed some well completions in Appalachia, intending to capitalize on more favorable natural gas prices later in the year. As a result, JPMorgan's natural gas production estimate for Coterra sits in the lower half of the company's guidance range.
The updated cash flow per share (CFPS) and EBITDA estimates are 7% and 3% below the sell-side consensus, respectively. The firm's first-quarter CFPS estimate is $0.99, slightly lower than the consensus of $1.06, and the EBITDA projection is $834 million, compared to the consensus of $863 million.
The total production estimate by JPMorgan stands at 670 thousand barrels of oil equivalent per day (MBoe/d), which is 1% below the consensus estimate of 677 MBoe/d. While the oil production estimate is slightly ahead at 98.9 MBoe/d, natural gas production is anticipated to be 1% below the consensus at 2,875 million cubic feet per day (MMcf/d).
Coterra has consistently exceeded oil production expectations, surpassing the high-end of guidance for the past five quarters. JPMorgan's capital expenditure estimate for the first quarter is $503 million, aligning with the consensus and guidance midpoint. However, the firm anticipates a modest increase in second-quarter capital expenditures, projecting $489 million, which is 8% higher than the consensus of $454 million.
Coterra is expected to generate $235 million in free cash flow (FCF) for the quarter. JPMorgan estimates that the company will return almost all of this FCF to its shareholders through a $0.21 base dividend and approximately $80 million in stock buybacks.
Following a $500 million debt offering in February, which, along with $75 million in cash, will address the September 2024 bond maturity, Coterra may increase its share buyback program. This is due to the reduced need to maintain a high cash balance, with JPMorgan suggesting that around $500 million might become the new normal for Coterra's minimum cash balance.
InvestingPro Insights
With the recent analysis by JPMorgan, it's prudent to consider the latest real-time data and insights from InvestingPro. Coterra Energy's market capitalization stands at a robust $21.33 billion, and its price-to-earnings (P/E) ratio is 13.21, reflecting a valuation that may attract investors looking for reasonably priced earnings potential. Additionally, the stock’s P/E ratio has remained stable, with the last twelve months as of Q4 2023 showing a P/E of 13.17. Despite a notable revenue decline of over 40% in the same period, Coterra Energy has managed to maintain a high gross profit margin of nearly 73%, suggesting efficient control over production costs.
InvestingPro Tips highlight several facets of Coterra's financial health and market performance. Notably, the company has been profitable over the last twelve months, and analysts predict profitability will continue this year. Moreover, Coterra Energy has demonstrated a commitment to returning value to shareholders, maintaining dividend payments for 35 consecutive years. This consistent dividend history, coupled with the company's moderate level of debt and the ability of its cash flows to cover interest payments comfortably, may reassure investors looking for stable income and financial prudence.
For those seeking more in-depth analysis, InvestingPro offers additional tips that could provide further insight into Coterra Energy's performance and outlook. As of now, there are 6 more InvestingPro Tips available, which can be accessed at InvestingPro. Readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, uncovering a deeper level of financial expertise.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.