On Monday, Truist Securities increased its price target for ConocoPhillips (NYSE:COP) shares to $165 from the previous $160, while reiterating a Buy rating for the stock.
The adjustment follows the company's recent acquisition of Marathon Oil Resources (NYSE:MRO), which is expected to be immediately accretive to earnings and free cash flow (FCF) per share.
The Truist Securities analyst believes that the acquisition will enhance ConocoPhillips' inventory position, placing it in the upper quartile.
Additionally, the analyst addressed misunderstandings regarding management's comments on refracturing operations, clarifying that any potential secondary benefits from refracs have not been factored into the value of the deal. Instead, these benefits are viewed as an extra advantage.
ConocoPhillips' performance post-acquisition is projected to be strong, with the possibility of generating over $18 billion in free cash flow the following year. This would result in a free cash flow yield exceeding 12%, which is anticipated to be the highest among major oil companies.
The analyst expects that the MRO acquisition will lead to a significant increase in shareholder returns. With the updated price target and the potential for enhanced financial performance, ConocoPhillips is poised to continue achieving its objectives and delivering value to its investors.
InvestingPro Insights
With ConocoPhillips (NYSE:COP) catching the eye of Truist Securities, investors might also be interested in the latest metrics and analysis from InvestingPro. The company's market capitalization stands robust at $136.23 billion, reflecting its significant presence in the market. Its Price/Earnings (P/E) ratio, a measure of the company's current share price relative to its per-share earnings, is currently at a reasonable 13.12. Moreover, ConocoPhillips has demonstrated a solid track record with 54 years of consistent dividend payments, underlining its commitment to returning value to shareholders.
InvestingPro Tips highlight that ConocoPhillips is a prominent player in the Oil, Gas & Consumable Fuels industry and operates with a moderate level of debt. The company's cash flows are substantial enough to cover its interest payments, which suggests financial stability and resilience. Additionally, analysts are optimistic about the company's profitability, predicting profitability for this year and noting its profitable performance over the last twelve months.
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