Stocks ticked upward this morning after finishing last week at record highs. On Friday, stocks rallied into the close after the House passed the more than $1 trillion infrastructure bill that the Senate approved in late August. A better than expected October jobs report helped lift all three major indices to record closes.
Investor sentiment could be tested later this week by potentially hot inflation readings. The producer price index and consumer price index are slated for release on Tuesday and Wednesday, respectively.
A recent merger has positioned the company featured in today’s trade alert for substantial cash generation. This story has enormous potential for both earnings and dividends growth, and this is just the first chapter.
Last month, Cabot Oil & Gas Corp and Cimarex Energy Co. completed their merger to form Coterra Energy Inc. (CTRA). The diversified energy company says it is now positioned to “facilitate significant capital returns while it delivers substantial and sustained cash generation across all cycles.” The company seems to be laying the tracks for a solid future with plans to leverage a top-tier asset base across over 700,000 net acres. It strengthens its commitment to socially conscious investing.
Mizuho’s Vincent Lovaglio is among several analysts who positively revised their recommendations for the stock. He upgraded Coterra Energy to Buy from Neutral, raising the price target to $31, up from $21. The analyst forecasts the company delivering 17% unlevered free cash yield over the next two years with “enhanced capacity” for payouts relative to peers given its balance sheet is “quickly approaching zero net debt,” pointing out that Coterra is the only gas-weighted producer with no volumes hedged for 2022, which should position it to capture all incremental upside from natural gas.
Coterra is on track to generate free cash flows, which it plans to return to shareholders. The company’s dedication to its investors was evident last month when the Board of Directors declared a special cash dividend of $0.50 per share.
“This special cash dividend reflects Coterra’s commitment to delivering peer-leading capital returns to shareholders. Building on our strong balance sheet, our flexibility to allocate capital across premier oil and natural gas assets, and our proven ability to operate efficiently, Coterra is poised to continue meeting our capital return commitments across commodity price cycles and creating enhanced shareholder value,” Said Thomas E. Jorden, Chief Executive Officer, President, and Director of Coterra.
Analysts have taken a more bullish stance on the firm’s short and long-term potential. Over the past 45 days, current quarter EPS estimates have risen from $0.44 per share to $0.50 per share, while 2021 estimates have risen from $1.78 per share to $2.22 per share. Moreover, analysts forecast an impressive EPS growth rate of nearly 33% next year and average annual growth of more than 71% for the next five years.
The consensus among 27 polled analysts is to Buy CTRA. There are 18 Buy, 9 Hold, and no Sell ratings for the stock. A median 12-month price target of $27 represents a 25% increase from the last price.
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