On Wednesday, JPMorgan (NYSE:JPM) increased its price target for Range Resources Corp (NYSE:RRC), an oil and gas exploration and production company, to $37.00 from the previous target of $33.00. Despite the higher price target, the firm maintained its Underweight rating on the stock.
The adjustment follows the anticipation of another solid operational quarter for Range Resources, which is expected to lay the groundwork for sequential volume growth in the latter half of the year. JPMorgan's projection for the company's second-quarter production is 2.12 billion cubic feet equivalent per day (Bcfe/d) at a capital expenditure of $181 million. This forecast is slightly less capital efficient compared to the street estimate of 2.13 Bcfe/d at $173 million in capital expenditures.
JPMorgan's analysis indicates that the difference is largely due to timing, as their full-year 2024 forecast aligns with the street estimate, predicting 2.15 Bcfe/d at $643 million in capital expenditures. The bank expects Range Resources' second-quarter gas realization before hedging to be $1.42 per thousand cubic feet (Mcf), which is based on a differential of $0.47 per Mcf to their Henry Hub benchmark price of $1.89 per Mcf.
On the liquids front, the firm models natural gas liquids (NGL) realizations at $24.16 per barrel, approximately 30% of the West Texas Intermediate (WTI) price, with a $1.00 per barrel premium to Mont Belvieu pricing.
Range Resources has expressed a positive outlook on global liquids fundamentals, particularly due to its strategic positioning at Marcus Hook. The company anticipates potential U.S. export capacity constraints along the Gulf Coast towards the end of 2024 and the beginning of 2025, which could lead to improved international arbitrage opportunities and higher premiums for its liquefied petroleum gas (LPG) exports.
For the second quarter of 2024, JPMorgan forecasts earnings per share (EPS) and cash flow per share (CFPS) of $0.33 and $0.89, respectively, compared to the street estimate of $0.45 and $0.93. The firm's estimate for earnings before interest, taxes, depreciation, amortization, and exploration expenses (EBITDAX) stands at $245 million, which is below the street estimate of $267 million.
The bank attributes this variance to its lower gas price assumption and a slightly reduced volume estimate for the quarter.
JPMorgan highlights Range Resources' consistent execution in the field and management's strategic hedging approach, which has preserved free cash flow generation in a challenging gas market. The bank models $35 million of free cash flow before changes to working capital and approximately $138 million of hedging gains for the second quarter of 2024.
In other recent news, Range Resources Corporation (NYSE:RRC) has been the focus of several analyst adjustments and has reported a robust first quarter for 2024.
Jefferies updated its financial model for the company, raising its stock price target to $34.00 based on a higher expected realization from natural gas liquids (NGLs) and an anticipated shift in the company's liquids mix. Piper Sandler also increased its price target for Range Resources to $43.00, following better-than-expected first-quarter earnings due to a favorable liquids mix and improved NGL pricing.
Mizuho Securities raised its price target to $41, acknowledging Range Resources' solid execution and potential to generate significant free cash flow in 2024.
RBC Capital Markets, however, downgraded the stock from Outperform to Sector Perform while increasing the price target to $39, citing a weak natural gas market and a downward revision in their natural gas price outlook. Despite these challenges, they acknowledged the company's shift towards more liquids-rich drilling, which currently benefits from healthier pricing.
In the company's first quarter 2024 earnings call, Range Resources outlined a strong performance, with a capital spend of $170 million and daily production reaching 2.14 billion cubic feet equivalent. The company also improved its full-year NGL guidance and expects growth in US propane exports.
These recent developments highlight the company's strategic positioning and operational efficiency in the current commodity environment.
InvestingPro Insights
In light of JPMorgan's updated price target for Range Resources Corp (NYSE:RRC), real-time data from InvestingPro provides additional context for investors. Range Resources is currently valued at a market cap of $8.36 billion, with a Price/Earnings (P/E) ratio of 17.16. This reflects a moderate valuation compared to industry peers, and when adjusted for the last twelve months as of Q1 2024, the P/E ratio stands at an even more attractive 14.87. Moreover, the company's Price/Book ratio for the same period is 2.18, indicating that the stock may be reasonably priced relative to its book value.
From an operational standpoint, Range Resources has demonstrated profitability over the last twelve months, and analysts have revised their earnings upwards for the upcoming period, suggesting confidence in the company's financial prospects. Additionally, InvestingPro Tips highlight that the stock trades with low price volatility, which could be appealing for risk-averse investors. It's also worth noting that the company operates with a moderate level of debt, which may provide some financial flexibility in the current economic environment.
Investors looking to delve deeper into Range Resources' potential can find additional InvestingPro Tips, with a total of 7 insightful tips available at: https://www.investing.com/pro/RRC. To gain access to these valuable insights, remember to use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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