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On Tuesday, Barclays (LON:BARC) analyst Betty Jiang adjusted the price target for California Resources Corporation (NYSE:CRC) shares, reducing it to $55.00 from the previous $57.00 while maintaining an Equalweight rating. The stock, currently trading at $39.73, appears undervalued according to InvestingPro analysis. With analyst targets ranging from $57 to $80, and a consensus "Buy" rating, the market sees significant upside potential. Jiang’s assessment followed California Resources’ recent update, which she described as "overall solid."
The company’s fourth-quarter results for the year 2024 surpassed expectations, with better-than-anticipated realizations and lower capital expenditures. The company maintains strong profitability with a 55.2% gross margin and an EBITDA of $764 million for the last twelve months. For 2025, production and costs were reported to align closely with predictions, but capital expenditures were significantly below both Barclays’ and the broader market’s expectations, by 9% and 18%, respectively. InvestingPro data reveals 8 additional key insights about CRC’s financial health and market position.
Looking ahead to early 2026, Jiang noted that California Resources is expected to increase activities as permitting processes normalize, which should lead to steady production levels. Based on the company’s recent efficiency trends, Barclays has lowered its capital expenditure forecast to 8% below market expectations.
Despite the positive outlook, Jiang highlighted a concern regarding the deferral of a payment from the joint venture with Brookfield. This payment is now dependent on California Resources securing contracts for more than 35% of the annual storage capacity at its first fully permitted carbon storage vault, known as 26R. The market may have interpreted this as a lack of confidence from the joint venture partner, but Jiang clarified that discussions with management indicate the situation is more complex and should not be seen as a negative signal.
In conclusion, Barclays’ revised estimates for California Resources’ cash flows prior to working capital adjustments for 2025-2026 remain relatively unchanged following the update. The company currently generates $302 million in levered free cash flow with an attractive free cash flow yield of 8%. However, cash flow from operations for 2025 has decreased due to an approximate $220 million unforeseen working capital headwind. Nevertheless, at the company’s reference price deck, Barclays’ estimates are at the higher end of the $1.1-$1.2 billion guidance, with operating costs projected near the lower end of the range. For comprehensive analysis and detailed valuation metrics, access the full CRC research report on InvestingPro.
In other recent news, California Resources Corporation (CRC) reported its fourth-quarter 2024 earnings, which showed the company missing both earnings per share (EPS) and revenue expectations. CRC posted an EPS of $0.91, falling short of the anticipated $0.9898, while revenue reached $877 million, below the forecasted $908.46 million. The company highlighted its significant progress in carbon capture and storage initiatives and returned approximately 85% of its 2024 free cash flow to shareholders. Despite the earnings miss, CRC plans to expand its drilling operations in 2025 and expects adjusted EBITDAX for 2025 to range between $1.1 billion and $1.2 billion. Analysts from RBC Capital Markets and Bank of America inquired about CRC’s strategic plans, including carbon capture project timelines and the impact of shareholder lockup agreements. CRC’s CEO, Francisco Leon, emphasized the company’s focus on carbon management and decarbonization efforts, noting an agreement with National Cement as a recent milestone. The company also plans to continue reducing debt and returning value to shareholders, while exploring new growth opportunities in AI data centers and other sectors.
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