Citi raises Vital Energy stock price target to $20 on improved pricing

Investing.com - Citi raised its price target on Vital Energy (NYSE:VTLE) to $20.00 from $17.00 while maintaining a Neutral rating on the stock. The stock, currently trading at $18.92, has shown resilience with a 13% gain over the past week, though it remains significantly below its 52-week high of $47.80. According to InvestingPro analysis, the stock appears fairly valued at current levels.

The price target increase was driven by Vital Energy’s conservative near-term hedge book and improved pricing assumptions, according to Citi’s research note.

Citi updated its model with revised estimates ahead of earnings, projecting discretionary cash flow of approximately $285 million, slightly above consensus estimates of $273 million, with realizations being the primary driver of the difference.

The firm models production in the quarter at the mid-point of guidance while expecting capital spending to be at the top-end due to timing, though full-year expectations remain unchanged.

Citi anticipates the upcoming earnings call will focus on recent drilling results, with specific attention to capital efficiency and well productivity as they relate to debt reduction, along with questions about the company’s hedging program and ability to further reduce breakeven pricing levels.

In other recent news, Vital Energy Inc. reported its first-quarter earnings for 2025, surpassing Wall Street expectations with an earnings per share (EPS) of $2.37, compared to the forecasted $2.08. However, revenue fell short, coming in at $512.18 million against a projected $534.33 million. The company managed to reduce net debt by $135 million during the quarter. S&P Global Ratings revised its outlook for Vital Energy from positive to stable, maintaining the ’B’ issuer credit rating, due to slower than expected debt reduction and lower commodity prices. The firm anticipates Vital Energy will generate about $510 million of positive free operating cash flow in 2025 and 2026 combined, aimed at reducing outstanding borrowings. Mizuho (NYSE:MFG) maintained a Neutral rating on Vital Energy, with expectations of capital expenditures approaching the top end of guidance for the second quarter of 2025. The company is focusing on strengthening its balance sheet, aiming for a $300 million debt-reduction target by year-end 2025. Vital Energy is also prioritizing organic inventory expansion over mergers and acquisitions, with updates expected on its new well design concept in the Delaware Basin.

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