Tuesday, RBC Capital Markets adjusted its price target on Orsted A/S (CSE:ORSTED:DC) (OTC: DNNGY (OTC:DNNGY)) shares, a Denmark-based renewable energy company, to DKK450.00, up from the previous DKK380.00. The firm maintained a Sector Perform rating on the stock.
The revision follows Orsted's first-half results and a subsequent analyst call last Friday, where management reiterated their disposal plan of DKK 70-80 billion for the period of 2024-2026.
They also aim for a more even distribution of proceeds over the three years, as opposed to the earlier view that the majority of proceeds would come towards the end of the period.
According to RBC Capital, disposals and a more favorable rate environment could provide near-term catalysts for Orsted. The company's divestment strategy is expected to include a mix of early-stage projects and operational assets. This divestment is a significant part of Orsted's funding plan, contributing 35%, with the remaining funding expected to come from 50% cash flow and 15% additional debt.
The analyst from RBC Capital highlighted that while these factors might act as catalysts, they are awaiting further clarity on the disposals. They also noted that there might be "cleaner ways to play" the favorable rate environment, suggesting that investors might find more straightforward investment opportunities in this area elsewhere.
Orsted's management has detailed the disposal plan as a key component of their funding strategy, indicating the company's proactive approach to managing its capital and assets over the coming years. The raised price target reflects RBC Capital's updated assessment following the latest financial results and management's strategic outlook.
In other recent news, Orsted, the Danish renewable energy firm, has reported a substantial rise in earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter of 2024. The company's EBITDA reached DKK 5.3 billion, a 59% increase from the same period last year, primarily due to a higher output from offshore wind farms.
These recent developments also include the commissioning of new renewable capacity and the advancement of storage and wind projects in Europe and the United States.
In the meantime, Deutsche Bank has adjusted its price target on Orsted's shares to DKK470.00 from DKK480.00, while maintaining a Buy rating. The adjustment came after the company's latest financial results, which included new impairments to the Revolution Wind project and updated guidance. Despite a decrease in the 2024 earnings forecast by approximately 25%, Deutsche Bank maintains a positive outlook due to recent movements in the bond market.
These developments come as Orsted continues to focus on executing its strategy for renewable portfolio growth, with the company expecting to reach final investment decisions on a backlog of onshore development projects by the end of 2024 or early 2025.
However, the commissioning of the Revolution Wind project has been delayed to 2026 due to onshore substation construction delays. Despite these challenges, Orsted is maintaining its full-year EBITDA guidance of DKK 23 billion to DKK 26 billion.
InvestingPro Insights
As Orsted A/S (OTC: DNNGY) continues to navigate the renewable energy landscape, recent data from InvestingPro provides a nuanced view of the company's financial health and market position. The company's market capitalization stands at $26.11 billion, reflecting its substantial presence in the industry. Despite experiencing a decline in revenue growth over the last twelve months, with a -22.7% change, Orsted has managed to maintain a robust gross profit margin of 48.73%. This suggests that while the company has faced challenges, its core operations remain profitable.
InvestingPro Tips highlight that Orsted has raised its dividend for seven consecutive years, signaling confidence in its financial stability and commitment to shareholder returns. Additionally, analysts predict the company will be profitable this year, providing a positive outlook amidst a period of strategic divestments and capital management.
For investors seeking deeper analysis, InvestingPro offers a range of additional tips. With Orsted's next earnings date on the horizon for November 5, 2024, and a fair value estimate by analysts at $24.28, these insights can be particularly valuable for making informed investment decisions. Explore further on InvestingPro for a comprehensive set of tips and metrics tailored to Orsted's stock performance.
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