On Thursday, Truist Securities adjusted its outlook on REX American Resources (NASDAQ:AREC) (NYSE:REX) shares, reducing the price target to $65 from $70, while keeping a Buy rating on the shares. The firm highlighted REX's consistent operational and financial performance despite challenges in the ethanol market.
The company's resilience in the first quarter was underscored, particularly given the less-than-ideal conditions for ethanol production.
Truist Securities noted REX's debt-free balance sheet as a positive factor that is expected to greatly benefit shareholders as the company advances its carbon capture, utilization, and storage (CCUS) initiatives.
REX American Resources has made significant strides in its CCUS project, securing all necessary pipeline right-of-ways and subsurface injection well easements.
The company is actively working on obtaining local and state approvals for its pipeline and project, as well as the Environmental Protection Agency's (EPA) class VI well permit.
However, due to adjustments to the estimated startup timeline and impact of the ethanol crush, Truist Securities has revised its EBITDA projections for 2024 and 2025 downwards.
This revision is the primary reason for the decrease in the price target to $65, while the analyst reaffirms the Buy rating on the company's stock.
InvestingPro Insights
In light of the recent analysis by Truist Securities on REX American Resources, real-time data from InvestingPro reveals additional aspects of the company's financial health and market performance. With a market capitalization of approximately $921.22 million and a P/E ratio of 14.06, REX is trading at a valuation that reflects its current earnings. Notably, the company's PEG ratio, which stands at a low 0.1, suggests that the stock may be undervalued relative to its near-term earnings growth potential.
InvestingPro Tips indicate that REX holds more cash than debt on its balance sheet, providing a cushion against market volatility and financial stress. Additionally, the company's liquid assets exceed its short-term obligations, highlighting a strong liquidity position. These factors, combined with the fact that analysts predict REX will be profitable this year and has maintained profitability over the last twelve months, offer a reassuring picture of the company's financial stability.
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