TD Cowen maintained its Hold rating on Range Resources (NYSE:RRC), with a consistent price target of $34.00. The firm's analysis followed Range Resources' recent financial results, highlighting a quarter that outperformed expectations, primarily due to higher than anticipated natural gas realized prices. The company's updated full-year 2024 production guidance now stands at 2.17 billion cubic feet equivalent per day (Bcfe/d), which aligns with TD Cowen's projections.
The company's capital expenditure forecast for the year has been adjusted, with a new midpoint range of $645 million to $670 million. This adjustment reflects the company's strategic decision to defer two turn-in-line (TIL) operations to 2025. According to the firm, this move is aimed at maximizing water savings and capitalizing on potential future improvements in gas prices.
The analyst from TD Cowen noted Range Resources' solid quarter, emphasizing the EBITDAX beats—earnings before interest, taxes, depreciation, amortization, and exploration expenses—that were driven by stronger natural gas prices than initially expected. The performance of the wells, along with optimized gathering and compression strategies, contributed to the company's ability to raise its production guidance for the next fiscal year.
The decision to defer the two TILs to 2025 was also mentioned as a strategic choice by Range Resources to conserve resources and wait for a more favorable pricing environment for natural gas. This move is seen as a way for the company to enhance efficiency and potentially increase profitability when market conditions are more advantageous.
In summary, TD Cowen's reiteration of the Hold rating and price target for Range Resources reflects the company's recent financial performance and strategic decisions regarding production and capital expenditure. The analyst's comments provided insight into the factors contributing to the firm's rating, including production guidance that meets their model and the tactical deferral of certain operations to future years.
Range Resources had a robust third-quarter performance, surpassing expectations due to strong gas and natural gas liquids (NGL) volumes and pricing. The company adjusted its full-year 2024 capital expenditure to the upper half of the previously stated range, now expecting a daily production rate of 2.17 billion cubic feet equivalent (bcfe/d).
Range Resources reported a third-quarter free cash flow that was 63% higher than consensus estimates, with capital expenditures 6% lower than anticipated, according to Stephens. This was due to better-than-expected production figures and realized pricing. Stephens raised its price target for Range Resources while maintaining an Overweight rating. Barclays upgraded the company's stock from Underweight to Equalweight, while Mizuho Securities maintained its Outperform rating on Range Resources.
The company also reported a mixed derivative fair value income of $47.1 million for the third quarter, despite a total non-cash fair value loss of $65.1 million. The company saw a net cash receipt on derivative settlements totaling $112.3 million.
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. Range Resources is also focusing on reducing its debt, aiming to achieve a net debt to EBITDA ratio of approximately 1.1x by the end of 2024. Lastly, Range Resources announced the retirement of board member Steve Gray, set for October 2024.
InvestingPro Insights
Range Resources' recent financial performance and strategic decisions align with several key metrics and insights from InvestingPro. The company's market capitalization stands at $7.24 billion, reflecting its significant presence in the natural gas sector. With a P/E ratio of 14.96, Range Resources appears to be reasonably valued compared to industry peers.
InvestingPro Tips highlight that Range Resources operates with a moderate level of debt, which could provide flexibility in managing capital expenditures and production strategies. This aligns with the company's decision to defer certain operations to 2025, potentially allowing for better resource allocation and improved financial positioning.
Additionally, InvestingPro Data shows that Range Resources has maintained profitability over the last twelve months, with a gross profit of $958.66 million and an impressive gross profit margin of 41.08%. This profitability is consistent with TD Cowen's observation of the company's solid quarter and EBITDAX beats.
It's worth noting that while 9 analysts have revised their earnings downwards for the upcoming period, InvestingPro Tips indicate that analysts still predict the company will be profitable this year. This suggests a cautiously optimistic outlook that aligns with TD Cowen's Hold rating.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Range Resources, providing a deeper understanding of the company's financial health and market position.
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