Citi cuts Vital Energy stock target to $36, retains Buy rating

On Tuesday, Citi analysts adjusted their outlook on Vital Energy (NYSE:VTLE) shares, lowering the price target to $36 from $44, while maintaining a Buy rating on the stock. Currently trading at $27.86, the stock has declined nearly 18% in the past week. The revision followed Vital Energy’s fourth-quarter 2024 earnings release, which showed an adjusted cash flow of approximately $336.9 million. This figure surpassed both the Visible Alpha consensus of around $311.5 million and Citi’s own estimate of approximately $319.2 million. According to InvestingPro data, the company’s revenue grew by 26% in the last twelve months, though it faces challenges with cash burn.

Despite the solid operational results, investor sentiment was dampened due to the company’s updated guidance. The guidance provided by Vital Energy indicated a decrease in capital expenditure and oil production by about 3.0% from initial estimates, contributing to a v-shaped production profile for 2025. Citi’s analysis expects production to be at the higher end of the company’s projected range for the year, with a low point in the second quarter and capital spending slightly above the midpoint. Operating expenses are anticipated to align with the company’s guidance. The company maintains a high gross profit margin of 67%, though InvestingPro analysis indicates significant debt burden with total debt reaching $2.55 billion.

The reduction in the price target to $36 per share reflects the lowered guidance and increased volatility in the broader sector’s macro fundamentals. Citi analysts continue to endorse a Buy rating for Vital Energy, signaling confidence in the stock despite the recent adjustments in financial forecasts and market conditions. The company’s latest financial performance and subsequent market reactions present a mixed picture, with operational strengths counterbalanced by strategic and economic uncertainties. While currently showing an overall "FAIR" financial health score on InvestingPro, analysts project improved profitability with an EPS forecast of $8.91 for FY2025. Discover more insights and 11 additional ProTips about Vital Energy with an InvestingPro subscription.

In other recent news, Vital Energy reported a net loss of $359.4 million for the fourth quarter, primarily due to a non-cash impairment loss, despite achieving record production levels. The company’s earnings per share of $2.30 exceeded analyst expectations by $0.17, but its revenue of $534.37 million fell short of the $546.9 million consensus estimate. Vital Energy’s production guidance for 2025 also disappointed, projecting 137 thousand barrels of oil equivalent per day, below the expected 140 MBOE/d. JPMorgan raised its price target for Vital Energy shares to $34, anticipating financial outperformance in the fourth quarter due to strong operational results and higher-than-expected natural gas pricing. Mizuho (NYSE:MFG) Securities also increased its price target to $38, noting expectations of a modest fourth-quarter earnings beat for 2024, while maintaining a Neutral stance on the stock. The company has shifted focus away from mergers and acquisitions, aiming to reduce debt and expand inventory organically. Recent updates to Vital Energy’s executive compensation arrangements include amendments to the Omnibus Equity Incentive Plan and the Change in Control Executive Severance Plan. These changes are designed to align with market practices and provide additional benefits to executives in the event of a change in control.

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