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On Tuesday, Citi analyst Douglas Irwin adjusted the price target for Archrock (NYSE:AROC) shares, increasing it to $33.00 from the previous $32.00, while reiterating a Buy rating on the stock. Currently trading at $25.69 with a market cap of $4.5 billion, Archrock maintains a strong Buy consensus among analysts. According to InvestingPro data, the stock appears overvalued despite its robust fundamentals. The price target revision reflects enhanced cash flow projections based on two main developments.
Irwin’s analysis points to Archrock’s 2025 EBITDA guidance, which surpassed expectations, with a projected midpoint of $770 million compared to Citi’s previous estimate of $728 million - a significant increase from the current EBITDA of $560 million. This boost is attributed to higher-than-anticipated capital expenditures and continued pricing tailwinds, building on the company’s impressive 16.89% revenue growth. Additionally, Archrock’s recent announcement of acquiring Natural Gas Compression Systems (NCGS) for $357 million has contributed to the positive outlook. The acquisition, which is slated for completion in the second quarter of 2025, is expected to be immediately accretive to both earnings per share and cash available for dividend per share. For detailed financial analysis and growth projections, investors can access the comprehensive Pro Research Report available on InvestingPro.
The NCGS acquisition is anticipated to bring in approximately 351,000 horsepower, mainly from the Permian region, at an acquisition multiple of less than 7.0 times. Citi’s preliminary estimates suggest a roughly 3% accretion to Archrock’s fiscal year 2025 prior to synergies, indicating potential for further financial gains.
In light of these factors, Citi has raised its 2025 EBITDA estimate for Archrock to $790 million, positioning it at the higher end of the company’s guidance range. The analyst’s commentary underscores a confident outlook for Archrock, citing the company’s ability to pursue growth opportunities due to its flexible balance sheet.
In other recent news, Archrock Inc. reported its fourth-quarter 2024 earnings, showcasing an adjusted earnings per share (EPS) of $0.35, which surpassed the consensus estimate of $0.3005. However, the company’s revenue slightly missed expectations, coming in at $326.42 million against a forecast of $326.77 million. Archrock’s robust financial performance included an Adjusted EBITDA of $184 million, exceeding both Stifel’s projection and consensus estimates. The company’s cash available for dividends reached $118.1 million, surpassing the previous quarter’s figures and Stifel’s forecast. Archrock also announced a dividend per share of $0.190, marking an 8.6% increase from the previous quarter.
In a strategic move, Archrock has announced the acquisition of Natural Gas Compression Systems, Inc. (NGCS) for approximately $357 million, a transaction expected to enhance Archrock’s operations and expand its footprint in the Permian Basin. RBC Capital Markets raised its price target for Archrock from $32.00 to $33.00, maintaining an Outperform rating, citing the company’s strong guidance for 2025 and planned capital expenditures to meet rising demand. This outlook aligns with Archrock’s strategic positioning to leverage growth in natural gas production. Stifel analysts reiterated their Buy rating on Archrock, with a steady price target of $27.00 following the company’s positive earnings report. These developments reflect Archrock’s strong market position and future growth potential in the natural gas compression sector.
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