On Wednesday, Citi maintained a Buy rating on Expand Energy (NASDAQ:EXE) stock and increased the price target to $100 from $97. The adjustment follows the company's third-quarter earnings for the year 2024, which showcased an adjusted cash flow of approximately $337 million. This performance aligned with the consensus and was slightly below Citi's own estimates.
Expand Energy's earnings were bolstered by production that met expectations and capital expenditures that were marginally lower than both the market and Citi's projections. The firm also issued preliminary guidance for the fiscal year 2025, anticipating production to average around 7.0 billion cubic feet equivalent per day (bcfe/d) with approximately $2.7 billion in capital expenditures.
Management at Expand Energy outlined their strategy for capital returns, prioritizing the base dividend, followed by an annual debt reduction of about $500 million. Subsequently, roughly 75% of the remaining free cash flow is slated for distribution. This structured approach to capital management was highlighted by Citi as a positive factor.
The price target increase to $100 per share reflects Citi's confidence in Expand Energy's strategic positioning after the market close. The firm's prudent operational planning and flexibility in managing cash flows contribute to this optimistic outlook, despite the ongoing volatility in commodity prices.
In other recent news, Expand Energy's preliminary 2025 capital expenditure forecast is approximately $2.7 billion, with production for fiscal year 2025 expected to reach about 7.0 billion cubic feet equivalent per day. Mizuho Securities USA estimates that Expand Energy's free cash flow in 2025 will reach $1.6 billion. This figure is approximately 12% higher than Mizuho's previous estimates and around 50% above the consensus among analysts.
The company has introduced a new cash return framework aiming to balance debt reduction and cash returns to shareholders, while preserving the current base dividend yield of around 4.2%. In addition, Expand Energy has increased its target for anticipated synergies following a deal by about 25% to $500 million.
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.
These recent developments come after the company's third-quarter financial results surpassed consensus estimates, with earnings before interest, taxes, depreciation, and amortization, and cash flow per share exceeding expectations. The company's fourth-quarter production and capital expenditure guidance matched analyst predictions.
Lastly, the company's acquisition of SWN 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.
InvestingPro Insights
Expand Energy's (NASDAQ:EXE) recent performance and strategic outlook are further illuminated by real-time data from InvestingPro. The company's market capitalization stands at $11.62 billion, with a P/E ratio of 26.54, indicating a relatively high earnings multiple. This valuation is supported by the company's profitability, as InvestingPro Tips highlight that Expand Energy has been profitable over the last twelve months and analysts predict continued profitability this year.
The company's financial health appears solid, with InvestingPro Tips noting that liquid assets exceed short-term obligations and the company operates with a moderate level of debt. This aligns well with management's strategy to prioritize debt reduction, as mentioned in the article.
However, investors should be aware that 11 analysts have revised their earnings downwards for the upcoming period, according to InvestingPro Tips. This caution is reflected in the expected sales decline for the current year, which may explain the company's focus on capital return strategies and operational efficiency.
For those seeking a deeper analysis, InvestingPro offers 13 additional tips for Expand Energy, providing a more comprehensive view of the company's financial position and market prospects.
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