On Wednesday, Citi updated its financial model for Range Resources Corp (NYSE:RRC), leading to a hike in the company's price target from $33.00 to $37.00, while maintaining a Neutral rating. The revision reflects a slight adjustment in expectations for the upcoming quarter's performance.
Citi's projections for the company's discretionary cash flow for the first quarter of 2024 are approximately $281.3 million, marginally above the consensus estimate of around $279.8 million.
The focus for the quarter is anticipated to be on any changes to the management's operational strategy due to expected market volatility. However, the company is likely to continue with its current approach, utilizing two rigs and one fleet throughout the year.
Citi predicts that Range Resources' production will be slightly lower than street expectations, with capital spending also forecasted to be beneath the consensus.
Despite the anticipated lower production and spending, the company's pricing realizations and operating expenses are expected to remain in line with guidance.
Citi acknowledges the company's operational consistency and stability, which it views favorably, but also notes a lack of significant catalysts that could drive the stock price, aside from its correlation with broader macroeconomic factors.
The updated price target to $37 per share is justified by a moderately bullish macroeconomic outlook looking ahead to 2025, according to Citi's analysis. This outlook appears to be factored into the new price target despite the unchanged Neutral rating on the stock.
InvestingPro Insights
Following Citi's updated financial model for Range Resources Corp (NYSE:RRC), InvestingPro data provides additional context to the company's current financial standing. As of the last twelve months up to Q4 2023, Range Resources has a market capitalization of $8.49 billion and trades at a P/E ratio of 9.02, indicating a potentially undervalued stock based on earnings. The company’s revenue for the same period stands at $2.55 billion, with an impressive operating income margin of 52.21%, showcasing strong profitability.
InvestingPro Tips suggest caution as the stock is currently in overbought territory according to the RSI, indicating that it may be due for a pullback. On the positive side, analysts have confidence in the company's profitability, predicting Range Resources will be profitable this year and noting that it has been profitable over the last twelve months. The company also boasts a strong return over the last five years, which could be of interest to long-term investors.
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