BMO cuts CES Energy Solutions target to Cdn$11, keeps Outperform

On Friday, BMO Capital Markets revised its price target for CES Energy Solutions (OTC:CESDF) Corp. (CEU:CN) (OTC: CESDF), reducing it to Cdn$11.00 from Cdn$13.00, while still maintaining an Outperform rating for the stock. This adjustment by BMO Capital follows CES Energy’s announcement of record fourth-quarter results, which included a significant increase in the company’s quarterly dividend. According to InvestingPro data, the company has maintained dividend payments for 19 consecutive years and shows strong financial health with an overall score of "GREAT."

CES Energy Solutions reported a robust performance in the fourth quarter, with EBITDA margins holding strong at approximately 17%. The company’s financial strength is evident in its impressive LTM EBITDA of $216 million and healthy gross profit margin of 24.3%. In response to these results, the company raised its quarterly dividend by 42% to $0.0425 per share, continuing its four-year streak of dividend increases. Despite the positive financial outcomes and the stock trading below InvestingPro’s Fair Value estimate, CES stock has not been immune to the broader market’s macro volatility.

BMO Capital’s analysts acknowledge the challenges posed by the uncertain market environment, which led to the modest reduction in the target price for CES Energy Solutions. Their positive outlook aligns with key metrics from InvestingPro, including an attractive P/E ratio of 8.5x and strong free cash flow yield of 12%. The company’s solid financial position is further supported by a healthy current ratio of 2.82, indicating robust liquidity to support operations and shareholder returns.

The company’s decision to increase its dividend reflects its financial health and commitment to shareholder returns, especially noteworthy given the current market fluctuations. CES Energy Solutions’ focus on maintaining solid EBITDA margins and its dividend growth strategy are key factors that BMO Capital believes will continue to support the company’s stock performance.

BMO Capital’s revised price target of Cdn$11.00 represents a cautious yet optimistic stance, taking into account the potential impacts of macroeconomic volatility while also recognizing the underlying strengths of CES Energy Solutions’ business model and financial discipline.

In other recent news, CES Energy Solutions reported its fourth-quarter results, showcasing a 24% year-over-year increase in adjusted EBITDAS to $103 million, surpassing the consensus estimate of $99 million. The company’s revenue aligned with analyst expectations at $605 million, and the adjusted EBITDAS margin reached the anticipated 17.0%. CES Energy also announced a 42% dividend increase to $0.0425 per share, payable on April 15, 2025, for shareholders on record as of March 31, 2025. Following these results, ATB Capital Markets upgraded CES Energy’s stock rating from Sector Perform to Outperform, maintaining a price target of Cdn$11.00.

The upgrade reflects confidence in CES Energy’s market position, despite a 28% year-to-date share performance decline. ATB Capital Markets noted CES Energy’s expanding market share and increased exposure to growing lateral footage per well, even as North American rig activity declined by 2% year-over-year in the fourth quarter of 2024. The firm anticipates strong performance for CES Energy in 2025, with record-high market shares in Canadian and U.S. drilling fluids and continued gains in production chemicals. While moderate margin pressures are expected in early 2025 due to delayed pricing adjustments in Canada, ATB Capital Markets maintains a positive outlook on CES Energy.

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