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Investing.com - William Blair initiated coverage on Civitas Resources (NYSE:CIVI) with a Market Perform rating on Monday. According to InvestingPro data, the company currently trades at an attractive P/E ratio of 3.98x and appears undervalued based on InvestingPro’s Fair Value analysis.
The research firm noted that Civitas has made several significant changes recently, including replacing its CEO, increasing stock repurchases, and implementing cost optimization measures. Despite these positive steps, William Blair believes the company still faces challenges in delivering substantial free cash flow, which it forecasts will remain "relatively moderate until mid-2026." InvestingPro analysis shows the company maintains a "GREAT" overall Financial Health Score of 3.06, with particularly strong performance in relative value metrics.
Civitas is currently focused on optimization programs targeting over $100 million in annual savings across cost, production, and midstream operations. The firm pointed out that while improving, Civitas’s per-foot costs and other metrics remain slightly higher than its peers.
The company has reinstated a 50/50 allocation of free cash flow between share buybacks and debt reduction. William Blair expressed concern about the company’s $5.4 billion debt load, suggesting all free cash flow should be directed toward debt reduction until there is minimal risk of leverage exceeding 2x during low commodity price periods. InvestingPro data reveals a debt-to-equity ratio of 0.79 and impressive gross profit margins of 70.89%, indicating strong operational efficiency despite the debt concerns.
Civitas has paused its acquisition strategy until its financial position improves. The company currently holds 357,000 net acres in the DJ Basin and 109,000 net acres in Midland, while its 32,000 net Delaware acres accounted for 50% of total company wells drilled and 30% of completions in the second quarter. With annual revenue of $4.82 billion, Civitas demonstrates significant operational scale. For detailed analysis and additional insights, investors can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Civitas Resources reported its second-quarter 2025 earnings, surpassing expectations with an earnings per share (EPS) of $1.34, compared to the forecast of $1.11. This marked a surprise increase of 20.72%. Despite this positive EPS result, the company experienced a slight revenue shortfall. In response to these financial outcomes, Piper Sandler adjusted its price target for Civitas Resources from $54.00 to $52.00, while maintaining an Overweight rating. This decision followed discussions about the company’s production forecasts and financial expectations. These developments reflect recent changes and analyses concerning Civitas Resources.
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