Newfield Exploration (NFX) Update - Oct 10
Posted: Wed Oct 10, 2018 11:18 am
In the last 3 months, 9 ranked analysts set 12-month price targets for NFX. The average price target among the analysts is $37.43. The 9 valuations range from $30 to $48.
For some reason, which I cannot figure out, Newfield must have pissed off some of the Wall Street Gang because there are still some VERY LOW revenue and EPS estimates that are included in the Reuters / First Call estimates for this company.
Newfield's EPS have topped the First Call estimates for nine straight quarters and, based on my forecast model, they will make it ten quarters in a row when they report Q3 results.
NFX is trading today at $27.32, which is 13.3% lower than where it was at the beginning of this year. It is in much better shape today than it was on January 1st.
> EPS of $2.12 in 2017 should increase to $2.90 in 2018 (and $4.57 EPS in 2019 if WTI stays over $65/bbl)
> Operating cash flow per share of $5.27 in 2017 should increase to $7.25 in 2018 (and $8.48 CFPS in 2019)
> Production is on-track to be up 24% to 25% YOY in 2018
> NFX is funding all capex with cash flow from operations and should generate over $100 million of free cash flow this year.
> NFX has no exposure to the Permian Basin takeaway capacity issues
> NFX has a market cap of $5.6 Billion
MY TAKE: The Wall Street Gang put NFX in the "penalty box" several years ago when they announced they were going to sell all of their assets in China and then pulled the deal off the market. Sometimes a company stays in the penalty box too long. Plus, the mid-caps seem to be off the Wall Street Gangs "radar screen", especially upstream companies that are not in the Permian Basin. I do think NFX needs to do a better job telling their story and I have communicated this to their IR department.
I have adjusted my valuation to $49/share, reducing the multiple of CFPS per share used to value it by 1X to take into affect the "penalty box" issue. If Newfield keeps reporting outstanding well results in STACK it has a lot more upside.
For some reason, which I cannot figure out, Newfield must have pissed off some of the Wall Street Gang because there are still some VERY LOW revenue and EPS estimates that are included in the Reuters / First Call estimates for this company.
Newfield's EPS have topped the First Call estimates for nine straight quarters and, based on my forecast model, they will make it ten quarters in a row when they report Q3 results.
NFX is trading today at $27.32, which is 13.3% lower than where it was at the beginning of this year. It is in much better shape today than it was on January 1st.
> EPS of $2.12 in 2017 should increase to $2.90 in 2018 (and $4.57 EPS in 2019 if WTI stays over $65/bbl)
> Operating cash flow per share of $5.27 in 2017 should increase to $7.25 in 2018 (and $8.48 CFPS in 2019)
> Production is on-track to be up 24% to 25% YOY in 2018
> NFX is funding all capex with cash flow from operations and should generate over $100 million of free cash flow this year.
> NFX has no exposure to the Permian Basin takeaway capacity issues
> NFX has a market cap of $5.6 Billion
MY TAKE: The Wall Street Gang put NFX in the "penalty box" several years ago when they announced they were going to sell all of their assets in China and then pulled the deal off the market. Sometimes a company stays in the penalty box too long. Plus, the mid-caps seem to be off the Wall Street Gangs "radar screen", especially upstream companies that are not in the Permian Basin. I do think NFX needs to do a better job telling their story and I have communicated this to their IR department.
I have adjusted my valuation to $49/share, reducing the multiple of CFPS per share used to value it by 1X to take into affect the "penalty box" issue. If Newfield keeps reporting outstanding well results in STACK it has a lot more upside.