On Monday, Citi analyst Scott Gruber adjusted the price target for Atlas (NYSE:ATCO) Energy Solutions Inc (NYSE:AESI), reducing it to $23.00 from the previous $25.00, while maintaining a Buy rating on the stock. The revision comes as Atlas Energy Solutions faces increased operating costs and challenges within the industry.
Gruber's assessment follows an updated model in anticipation of the company's third-quarter results and recent disclosures. The analyst noted that Atlas Energy Solutions' third-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) are estimated to drop by approximately 23% to $69 million, or $74 million when adjusted for stock compensation. This decrease is a significant reduction from the prior estimate of roughly $90 million.
The downward revision of the fourth-quarter EBITDA estimate to $73 million, or $78 million adjusted for stock compensation, is attributed to expected flat volumes and lower projected logistics revenue due to seasonality. This figure is about 23% lower than the previous estimate of $95 million.
Despite these short-term setbacks, Gruber anticipates a strong EBITDA growth for Atlas Energy Solutions in 2025, with a forecast of around $461 million, or $481 million adjusted. However, this is a decrease from the earlier projection of $561 million, taking into account the lower sand prices and increased production operating expenses during the first half of 2025.
The analyst also predicts a significant increase in cash return as cash flow rises and capital expenditures decline in 2025, once the company's conveyor system becomes fully operational.
In other recent news, Atlas Energy Solutions has experienced significant developments. The company's Q2 2024 revenues surged by 49% to $288 million, with an adjusted EBITDA of $72 million. In addition, Atlas Energy announced a dividend increase to $0.23 per share. Concurrently, RBC Capital Markets adjusted its price target for Atlas Energy to $26.00, down from the previous $27.00, but maintained an Outperform rating on the stock, citing the company's strong growth potential and robust profit margins.
Atlas Energy's board has expanded from eight to nine members, with CEO John Turner appointed to the new seat. His industry experience and tenure with Atlas Energy Solutions since its inception in 2017 are anticipated to provide valuable insights. Meanwhile, Goldman Sachs reiterated its Buy rating on Atlas Energy, maintaining a $23.00 price target for the company's stock, anticipating a significant increase in free cash flow by the year 2025.
Stephens reaffirmed its Overweight rating and $28.00 price target for Atlas Energy, despite revising its earnings estimates downwards due to operational setbacks. However, the firm noted the commissioning of the Dune Express, a 42-mile conveyor system, as a positive development.
InvestingPro Insights
To complement Citi analyst Scott Gruber's analysis, InvestingPro data offers additional context for Atlas Energy Solutions Inc (NYSE:AESI). The company's market capitalization stands at $2.25 billion, with a P/E ratio of 17.22, suggesting a moderate valuation relative to earnings.
InvestingPro Tips highlight that AESI has been profitable over the last twelve months, aligning with Gruber's expectation of strong EBITDA growth in 2025. The company's revenue growth of 28.38% over the last twelve months and an impressive 77.71% quarterly growth indicate robust business expansion, which could support the anticipated cash flow increases.
Another relevant InvestingPro Tip notes that AESI operates with a moderate level of debt, which could provide financial flexibility as the company navigates through the current challenges and invests in its conveyor system. This moderate debt level may also support the expected increase in cash returns mentioned by Gruber.
Investors should note that AESI offers a substantial dividend yield of 4.99%, with a remarkable dividend growth of 70% over the last twelve months. This aligns well with the analyst's prediction of increased cash returns in the future.
For readers interested in a more comprehensive analysis, InvestingPro offers 7 additional tips for AESI, providing a deeper understanding of the company's financial health and market position.
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