On Tuesday, TD Cowen adjusted its outlook on shares of California Resources (NYSE:CRC), increasing the price target to $74.00, up from the previous $65.00, while maintaining a Buy rating on the stock. The firm highlighted the company's potential for growth in 2025, citing several factors that could significantly enhance its value.
California Resources Corporation has been identified as a top pick for 2025 due to several key developments that are expected to drive its business forward. According to the analyst from TD Cowen, the company is poised to benefit from various "value unlocking catalysts" that have not yet been fully recognized by the market.
One of the primary drivers for the optimistic outlook is the acquisition completed in 2024, referred to as the '24 Aera deal. This transaction is anticipated to bring increased scale to the company, leading to greater operational efficiencies. The analyst noted that the upstream business alone is capable of supporting an 8% return on capital.
In addition to the benefits from the Aera transaction, California Resources is also expected to see substantial value growth from its carbon capture, utilization, and storage (CCUS) initiatives, as well as its power business. The analyst projects that these areas could contribute to over a 40% increase in net asset value (NAV) within the next year.
TD Cowen's revised price target and sustained Buy rating reflect a positive outlook on California Resources' strategic moves and its potential to outperform current investor expectations. The firm's analysis suggests that the company is well-positioned to unlock additional value for shareholders in the near future.
In other recent news, California Resources Corporation announced the appointment of Clio C. Crespy as the new Executive Vice President and Chief Financial Officer, effective from January 1, 2025. Crespy, a seasoned investment banker, will succeed the current CFO, Nelly Molina.
The change in leadership comes as the company reported a strong financial performance in the third quarter, with $402 million in adjusted EBITDAX and $141 million in free cash flow, and a return of $76 million to shareholders.
In addition, California Resources merged with Aera Energy, positioning it as the largest oil producer in the state. Analysts at Mizuho (NYSE:MFG) Securities have shown confidence in the company by raising its price target from $62.00 to $66.00 while maintaining an Outperform rating.
The company is also making strides in carbon management, awaiting the Environmental Protection Agency's Class VI permit for its inaugural carbon sequestration project and developing a series of brownfield carbon capture and storage projects.
Lastly, California Resources has hedged 72% of its 2025 oil production at $67 per barrel and plans to continue share repurchases, with $600 million remaining under authorization. These recent developments highlight the company's ongoing commitment to financial discipline, strategic growth, and operational efficiency.
InvestingPro Insights
California Resources Corporation's (NYSE:CRC) recent performance and financial metrics align with TD Cowen's optimistic outlook. According to InvestingPro data, CRC is trading at a P/E ratio of 8.1, which suggests the stock may be undervalued relative to its earnings potential. This low valuation could provide room for the stock price to grow, supporting TD Cowen's increased price target.
The company's strong financial health is evident in its profitability over the last twelve months and analysts' predictions of continued profitability this year. These factors underscore the potential for CRC to capitalize on the growth opportunities highlighted by TD Cowen, particularly from the Aera deal and CCUS initiatives.
InvestingPro Tips reveal that CRC has raised its dividend for 4 consecutive years, with a current dividend yield of 2.67%. This consistent dividend growth, coupled with a 37.17% dividend growth rate in the last twelve months, demonstrates the company's commitment to returning value to shareholders. This aligns well with TD Cowen's view of CRC as a top pick for 2025.
Additionally, CRC is trading near its 52-week high, with a strong return over the last five years. This performance trend supports the analyst's positive outlook on the stock's future potential.
For investors seeking more comprehensive analysis, InvestingPro offers 5 additional tips for CRC, providing a deeper understanding of the company's prospects.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.