Tuesday, Citi maintained its Buy rating on Aris Water Solutions Inc (NYSE:ARIS) stock with a steady price target of $14.00. The firm anticipates the possibility of the company resuming dividend growth as early as this quarter. Management has indicated a potential dividend increase or share buybacks after achieving positive free cash flow after dividends (FCFaD).
Aris Water Solutions could potentially boost its dividend by over 40% while still retaining surplus cash flow for future growth opportunities. However, share repurchases are deemed less likely due to the company's recent stock performance and its low number of shares available for trading.
Citi's expectations for Aris Water Solutions' first-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) are set at $47 million. This figure surpasses the average analyst estimate of $45 million and aligns with the upper end of the company's own guidance range of $43 to $47 million. The forecasted earnings outperformance is attributed to higher-than-anticipated crude oil prices.
Despite a projected roughly 30% sequential decrease in water solutions volumes, which aligns with guidance and is attributed to seasonal variation in water sourcing and a shift in activity to the fourth quarter of 2023, volumes are expected to recover as the year progresses and producer activity increases.
The company has continued to connect systems to electricity during the first quarter of 2024, which is expected to contribute to further cost reductions and margin improvements.
InvestingPro Insights
As Aris Water Solutions Inc (NYSE:ARIS) garners attention with Citi's maintained Buy rating and potential dividend growth, real-time data from InvestingPro provides additional insights into the company's financial health. The market capitalization stands at a robust $820.23 million, indicating a substantial presence in the industry. With a gross profit margin of 54.93% over the last twelve months as of Q1 2023, the company showcases impressive efficiency in its operations. Moreover, the stock has experienced a significant price total return of 88.31% over the past year, reflecting strong investor confidence and market performance.
InvestingPro Tips highlight the expected growth in net income this year and the company's profitability over the last twelve months. These factors, combined with the company's high return over the last year and the last three months, suggest a strong financial trajectory. For those seeking a deeper analysis and more InvestingPro Tips, there are 9 additional tips available that provide further insight into Aris Water Solutions' prospects. Interested readers can access these tips and enhance their investment strategies by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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