On Thursday, UBS changed its stance on Equinor ASA (NYSE::NO) (NYSE: EQNR), upgrading it from Sell to Neutral and adjusting the price target to NOK 280.00, up from the previous NOK 275.00.
The adjustment comes after a period of decline in Equinor shares, which fell 10% over the past month, a move attributed to general weakness in oil prices and a broader market sell-off.
UBS’ revised outlook reflects a more balanced assessment of near-term risks for Equinor. The company cites that European gas prices have remained at higher than expected levels despite the downturn, which may insulate the company from some market volatility.
Although current forecasts suggest a potential downside risk to Equinor’s earnings for 2024 and 2025, UBS expects oil prices to recover. In addition, the impact of European gas prices on Equinor’s finances is expected to be less significant than previously thought.
UBS’s re-rating also takes into account changes in market expectations, noting that its position is now closely aligned with consensus. In addition, the firm highlights Equinor’s industry-leading 18% distribution yield for 2024, which is expected to increasingly help support the share price. This yield is particularly notable as it stands out within the industry and could attract investor interest.
The upgrade and increase in the price target by UBS indicate a change in the investment firm’s view of Equinor shares and suggest a more neutral assessment of the company’s prospects in light of recent market challenges. The new price target of NOK 280.00 is only 2% below the current trading price of Equinor shares, signaling a slightly improved outlook for the energy company.
In other recent news, Equinor ASA reported impressive first quarter financial results, including adjusted net income of $2.7 billion and adjusted operating income before tax of $7.5 billion. This strong performance was driven by an increase in production and the acquisition of new production licenses.
In addition, Equinor has completed a transaction with EQT (ST:) to strengthen its position in the US onshore gas business, a move aimed at increasing both production and profitability.
TD Cowen lowered the price target on the company’s shares, but the company maintained a Hold rating. This adjustment was due to a revised earnings outlook that included a second-quarter 2024 earnings per share (EPS) estimate of $0.85, above the consensus estimate of $0.78 per share. The revision takes into account weaker results in the marketing, midstream and processing (MMP) segment, as well as the impact of higher-than-expected gas prices in Norway.
In the renewable energy sector, Equinor is nearing an investment decision for the Empire Wind 1 project in New York. The company has proposed a substantial cash dividend of $0.35 per share and a two-year share buyback program.
Equinor has a solid financial position with over $37 billion in cash and equivalents and expects to make total capital distributions of $14 billion in 2024. These recent developments are part of the Company’s strategic focus on improving operating efficiencies, advancing its renewable energy portfolio and maintaining strong capital distribution.
InvestingPro Insights
Following UBS’s re-rating of Equinor ASA (EQNR:NO) (NYSE: EQNR), real-time data from InvestingPro provides additional insights into the company’s financial health and market performance. With a market capitalization of $72.65 billion, Equinor is a significant player in the oil, gas and consumer fuels industry. Its P/E ratio, a key indicator of market expectations for the company’s earnings growth, currently stands at an attractive 8.02, suggesting the stock may be undervalued relative to its earnings potential.
InvestingPro Tips highlights that Equinor is not only a significant player in the industry but also has a strong dividend history. The company has paid dividends for 23 consecutive years. This consistency is reflected in the company’s substantial dividend yield of 10.82% according to the latest data, which could be an attractive option for income-seeking investors. In addition, with its low price volatility, Equinor stock offers stability in a sector often characterized by fluctuating oil and gas prices.
For investors seeking further analysis and tips, InvestingPro offers additional insights, including the fact that Equinor has been profitable over the past twelve months and that analysts are predicting the company will remain profitable this year. Equinor’s strong return over the past five years is further evidence of its resilience and strategic business operations. For a more comprehensive view of Equinor’s financials and future prospects, including more detailed tips, investors can explore InvestingPro’s platform, which currently lists over ten additional tips for Equinor.
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