Market Overview

MKM On Cabot Oil & Gas: Buy The Dip

Share:

Shares of Cabot Oil & Gas Corporation (NYSE: COG) are down around 30% since the middle of April and now reflects a potential 20% intrinsic equity value upside potential, according to MKM.

The Analyst

MKM Partners's John Gerdes upgraded Cabot Oil's stock from Neutral to Buy with a price target lowered from $26 to $25.

The Thesis

Cabot earns the title of operating the lowest capital intensity business among the North American E&P space with a full-cycle return of 210% versus the gas industry median full-cycle return of 100%-105%, Gerdes wrote in the note. The company should be able to show an 8% production compounded annual growth rate through 2021 with capital spending 40%-45% less than cash generation.

By comparison, peers operating in the Marcellus region are expected to show a 4% CAGR production rate while with growth spending at 5-10% beyond cash generation.

Assuming a reasonable 12.5% equity discount rate, the research firm's net present value model implies a 30% upside potential to $25 per share. This is based in part on 2019 production growth of 18%, which is consistent with management's own 16%-18% range and a 2020 growth outlook of 5%. These growth rates are within the company's capital intensity measurement error and reflects expectations of using a three-rig drilling program in 2020.

Price Action

Shares of Cabot Oil & Gas were trading flat at $19.16 Monday afternoon.

Related Links:

Benzinga's Top Upgrades, Downgrades For July 29, 2019

42 Stocks Moving In Monday's Mid-Day Session

Latest Ratings for COG

DateFirmActionFromTo
Sep 2019UpgradesPeer PerformOutperform
Aug 2019MaintainsBuy
Aug 2019UpgradesHoldBuy

View More Analyst Ratings for COG
View the Latest Analyst Ratings

Posted-In: Analyst Color Upgrades Price Target Analyst Ratings

 

Related Articles (COG)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
PTONBank of AmericaInitiates Coverage On29.0
ITRICanaccord GenuityMaintains87.0
GWPHNeedhamInitiates Coverage On200.0
BABairdDowngrades
LUVStifelDowngrades60.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

New CME Micro E-Mini Nasdaq-100 Index Futures And Earnings Season

JPMorgan Says Starbucks Valuation Has Become 'Beyond A Stretch'