Antero Resources shares upgraded to Buy on improved earnings power outlook

On Wednesday, CFRA analyst Stewart Glickman upgraded Antero Resources (NYSE:AR) stock from Hold to Buy, significantly increasing the price target to $43.00 from the previous $29.00. This upgrade aligns with broader market sentiment, as InvestingPro data shows six analysts have revised their earnings upward for the upcoming period.

The stock has demonstrated strong momentum, gaining over 64% in the past year and currently trading near its 52-week high of $39.43. Glickman's reassessment is based on a positive shift in the natural gas market outlook, which is expected to benefit the company's financial performance.

Glickman justifies the new price target by applying a 7.9x multiple of enterprise value to projected 2025 EBITDA, which is above Antero Resources' historical forward average. With current EBITDA at $880.55 million and a market capitalization of $12.01 billion, investors should note that InvestingPro analysis suggests the stock is trading above its Fair Value. The revision reflects a more optimistic view of natural gas prices going forward.

In line with this, CFRA has raised its earnings per share (EPS) estimate for Antero Resources for 2024 from $0.03 to $0.11 and for 2025 from $2.13 to $2.59. Discover 12 additional key insights about AR with an InvestingPro subscription, including detailed valuation metrics and growth forecasts.

The U.S. Energy Information Administration (EIA) has reported that U.S. working gas in storage is currently about 6.5% above the five-year average for this time of year. However, Glickman expects this surplus to diminish as increased demand is driven by an extended period of cold weather across the nation. Additionally, Antero Resources is anticipated to gain from the growing spot demand for U.S. liquefied natural gas (LNG), with the U.S. being a competitive low-cost provider.

The company's cost profile is also viewed favorably by CFRA, being relatively better than the industry average. With the anticipated improvement in natural gas pricing, Glickman predicts a significant rise in Antero Resources' earnings power. The company's financial health is underscored by a debt-to-capital ratio of 26% and a gross profit margin of 63.79%.

No major debt repayments are due until 2029, providing further confidence in its fiscal stability. Access the comprehensive Pro Research Report for AR and 1,400+ other stocks through InvestingPro to make more informed investment decisions.

In other recent news, Antero Resources has seen noteworthy developments in its financial strategy. The company reported a 22% reduction in drilling time and an 8% decrease in total well costs in its Q3 earnings call. Furthermore, a 2024 capital budget of $650 million was set, marking a 28% reduction from 2023.

JPMorgan analyst Arun Jayaram maintained an Overweight rating on Antero Resources, boosting the price target to $38.00 from the previous $36.00. Jayaram expects a solid operational performance from the company in the fourth quarter of 2024, with production volumes in line with the Street estimates but with slightly higher capital expenditure due to the timing of completions.

Looking ahead to 2025, Jayaram anticipates that Antero Resources will maintain a production level of 3.40 billion cubic feet equivalent per day with a total capital expenditure of $818 million. The company is also expected to prioritize paying down its credit facility and the remaining 2026 senior notes, with plans to restart its shareholder return program in the latter half of the year.

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