On Thursday, BofA Securities adjusted its stance on Woodside (OTC:WOPEY) Energy Group Ltd (WDS:AU) (NYSE: WDS) stock, downgrading from Buy to Neutral and revising the price target to AUD30.00 from AUD33.00. The revision reflects a reassessment of the company's asset values, including updates to cost and production estimates for key projects such as Shenzi, Atlantis, NWS, Ngujima-Yin, and Scarborough.
The downgrade comes despite an increase in the firm's Brent crude oil price forecast for 2024. The analyst cited the anticipated expansion of non-OPEC+ oil supply and LNG growth from 2025 as factors that could cap medium-term oil and LNG prices. The firm's report indicated that these market dynamics are likely to limit the potential for an upward movement in Woodside's share price over the next year.
While acknowledging the attractiveness of Woodside's diversified asset portfolio and its strong balance sheet, the analyst noted that the company is expected to see flat production in 2024. This projection, combined with an anticipated low energy price volatility over the next 12 months, is seen as a constraint on the stock's upside potential.
In terms of financial projections, BofA Securities increased its estimate for Woodside's EBITDA in 2024 by 5%. However, it lowered the EBITDA estimates for the subsequent two years, 2025 and 2026, by 6%. This adjustment in earnings before interest, taxes, depreciation, and amortization reflects the firm's updated expectations for Woodside's financial performance in the medium term.
InvestingPro Insights
As investors digest the recent downgrade of Woodside Energy Group Ltd by BofA Securities, it's worth considering additional insights provided by InvestingPro. The company, which has been a consistent payer of dividends, is currently trading near its 52-week low, which may interest value-seeking investors. Woodside has maintained dividend payments for 33 consecutive years, showcasing a commitment to shareholder returns, and offers a significant dividend yield of 5.82% as of the latest data.
According to InvestingPro data, Woodside's market capitalization stands at $38.13 billion, with an adjusted P/E ratio for the last twelve months as of Q4 2023 of 19.49. Despite a revenue decline of 16.79% over the same period, the company's gross profit margin remains robust at 46.27%. Analysts remain optimistic about Woodside's profitability, predicting the company will be profitable this year, supported by a moderate level of debt and cash flows that can sufficiently cover interest payments. Moreover, the stock's low price volatility aligns with the current market expectation of low energy price volatility.
For those interested in a deeper analysis, InvestingPro offers additional tips on Woodside, such as the company's operational efficiency and future earnings potential. To benefit from the full range of insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 5 more InvestingPro Tips available for Woodside Energy Group Ltd at: https://www.investing.com/pro/WDS.
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