On Monday, Truist Securities updated its outlook on CNX Resources (NYSE:CNX), increasing the stock's price target to $31 from the previous target of $30, while reaffirming a Buy rating for the company's shares. The adjustment comes as the firm revised its financial model to reflect updated forecasts for the years 2024, 2025, and 2026.
The new price target set by Truist Securities is based on a combination of two equally weighted valuation methods. The first method applies a 6.0x multiple on the firm's 2025 estimated EBITDAX (Earnings Before Interest, Taxes, Depreciation, Amortization, and Exploration expenses) of $1,232 million, which is notably higher than the consensus estimate of $1,126 million. This multiple is significantly above the peer average of 3.9x.
The second valuation method used by Truist Securities involves a Free Cash Flow to Enterprise Value (FCF/EV) Yield assumption of 9.0%. This approach, together with the EBITDAX multiple, underpins the rationale for the increased price target.
Truist Securities' updated price target and maintained rating indicate a positive outlook for CNX Resources, as reflected in the firm's comprehensive analysis and adjusted financial model. The stock's new price target of $31 represents the firm's expectations for CNX Resources' future financial results and market performance.
In other recent news, CNX Resources has been the subject of revised expectations from Mizuho Securities. The firm maintained a Neutral rating on CNX Resources but raised the target price from $25 to $29, reflecting anticipated modest outperformance in the company's 2024 second-quarter earnings due to an effective hedging strategy. CNX Resources' larger hedge book, compared to its peers, has been beneficial during periods of weaker gas prices.
Additionally, CNX Resources has announced a joint venture with Deep Well Services, AutoSepSM Technologies. The venture aims to innovate the flowback phase in oil and gas operations with a compact automated flowback system. This system is expected to enhance efficiency, safety, and environmental sustainability by being less labor-intensive and more cost-effective than traditional methods.
InvestingPro Insights
Following the updated outlook from Truist Securities on CNX Resources, it's valuable to consider the latest data from InvestingPro. CNX Resources currently has a market capitalization of $3.95 billion and trades with a low price-to-earnings (P/E) ratio of 4.03, which is even lower than the adjusted P/E ratio for the last twelve months as of Q1 2024, at 4.15. This low P/E ratio may suggest that the stock is undervalued relative to its earnings. Additionally, the company has experienced significant revenue growth, with a 29.76% price total return over the last six months, indicating strong recent performance.
InvestingPro Tips highlight that management has been actively engaging in share buybacks, which can often be a sign of confidence in the company's value and future prospects. Furthermore, analysts predict CNX Resources will be profitable this year, which aligns with the positive outlook from Truist Securities. However, it's important to note that analysts have also revised their earnings downwards for the upcoming period and anticipate a sales decline in the current year. Investors may want to consider these mixed signals when evaluating the company's future performance.
For those seeking a deeper analysis, InvestingPro offers additional insights into CNX Resources, with a total of 13 InvestingPro Tips available to guide investment decisions. To explore these tips and more, you can visit https://www.investing.com/pro/CNX. Moreover, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking further valuable information to inform your investment strategy.
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