On Wednesday, Stephens, a financial services firm, increased its price target for Range Resources Corp (NYSE:RRC) to $37.00, up from the previous target of $36.00, while maintaining an Overweight rating on the stock. The adjustment follows the company's third-quarter performance, which exceeded market expectations in several key areas.
Range Resources reported third-quarter free cash flow (FCF) that was 63% higher than the consensus estimates, with cash flow per share (CFPS) coming in 18% above expectations. Additionally, the company's capital expenditures were 6% lower than anticipated. These results were bolstered by better-than-expected production figures, realized pricing, and unit cash costs.
In response to the company's guidance update, Stephens has revised its fourth-quarter 2024 CFPS estimates upwards by 3%. This revision is based on improved projections for production, lease operating expenses (LOE), gathering, processing & transportation (GP&T) costs, as well as realized prices for natural gas and natural gas liquids (NGLs).
During the quarter, Range Resources actively repurchased $24 million worth of its own shares and maintained its fixed dividend, signaling confidence in its financial stability. The company's well performance and optimized gathering and compression systems have resulted in production levels approximately 2% higher than the maintenance level sustained over the past three years.
Despite the positive outlook, Stephens noted a single point of concern regarding the implied fourth-quarter 2024 capital expenditure guidance, which is projected to be 10% higher than consensus estimates. Nonetheless, the firm has raised its net asset value (NAV) per share estimate and price target for Range Resources to reflect the higher price realizations achieved by the company.
In other recent news, Range Resources reported a mixed derivative fair value income of $47.1 million for Q3 2024, despite a total non-cash fair value loss of $65.1 million. The company also saw a net cash receipt on derivative settlements totaling $112.3 million.
Furthermore, Barclays upgraded Range Resources' stock from Underweight to Equalweight, while Piper Sandler downgraded the company from Overweight to Neutral. Additionally, the company announced the retirement of board member Steve Gray, set for October 2024.
On a separate note, Mizuho Securities maintained its Outperform rating on Range Resources, following meetings with the company's CEO, CFO, and VP of Investor Relations. The firm believes the company is well-positioned to benefit from the expected shift in the U.S. natural gas market from an oversupply to an undersupply by 2025. In addition, Range Resources is focusing on reducing its debt, aiming to achieve a net debt to EBITDA ratio of approximately 1.1x by the end of 2024.
In other developments, Barclays upgraded Range Resources' stock from Underweight to Equalweight, citing a more attractive valuation compared to peers Antero Resources (NYSE:AR) and Chesapeake Energy (NYSE:CHK). The firm also noted the potential for increased shareholder value through stock buybacks, which are expected to rise from approximately $60 million in fiscal year 2024 to around $180 million for fiscal year 2025.
Finally, Rigel (NASDAQ:RIGL) Resource Acquisition Corp secured a $1.5 million interest-free loan from its sponsor, Rigel Resource Acquisition Holding LLC, to support its operational expenses and business combination efforts.
InvestingPro Insights
Range Resources Corp's recent performance aligns with several InvestingPro metrics and tips. The company's market cap stands at $7.24 billion, with a P/E ratio of 14.96, indicating a relatively modest valuation compared to its earnings. This is particularly noteworthy given that Range Resources has been profitable over the last twelve months, as highlighted by one of the InvestingPro Tips.
The company's strong financial performance is further evidenced by its EBITDA of $1.13 billion for the last twelve months as of Q2 2024, although it's worth noting that EBITDA growth has declined by 58.34% during this period. This decline may be attributed to the challenging market conditions in the energy sector, as reflected in the 42.83% revenue decrease over the same period.
Despite these challenges, InvestingPro Tips suggest that Range Resources operates with a moderate level of debt and is expected to remain profitable this year, according to analyst predictions. These factors, combined with the company's recent share repurchases and maintained dividend, support Stephens' optimistic outlook.
For investors seeking a deeper understanding of Range Resources' financial health and future prospects, InvestingPro offers 7 additional tips, providing a more comprehensive analysis of the company's position in the current market landscape.
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