US stock futures inch higher with Q3 earnings on tap
On Thursday, JPMorgan analyst Arun Jayaram increased the price target for Devon Energy shares, traded on the New York Stock Exchange under the ticker (NYSE:DVN), to $48 from the previous target of $45, while maintaining a Neutral rating on the stock. The adjustment reflects Devon Energy’s latest earnings report and the forthcoming leadership transition, with CEO Rick Muncrief retiring at the end of February and COO Clay Gaspar set to take the helm on March 1. According to InvestingPro data, eight analysts have recently revised their earnings estimates upward for the upcoming period, with the stock showing strong momentum, up 14.79% year-to-date.
The company’s fourth-quarter performance highlighted a shift in management, as CEO-elect Gaspar announced plans to continue the strategy developed under Muncrief’s leadership, with an emphasis on capital efficiency, margin expansion, organic inventory growth, and technology utilization. Devon Energy also increased its fixed dividend by 9% to $0.24 per share, resulting in a current yield of 3.27%, and repurchased $301 million of its stock during the fourth quarter of 2024. InvestingPro analysis reveals the company has maintained dividend payments for 33 consecutive years, demonstrating strong commitment to shareholder returns. The company maintains a healthy financial profile with an overall "GOOD" Financial Health Score.
Looking ahead to 2025, Devon Energy has communicated its commitment to returning up to 70% of its free cash flow (FCF) to shareholders, with a focus on share buybacks. The company has indicated a target of returning between $200 million and $300 million per quarter through buybacks, in addition to a consistent fixed dividend of approximately $150 million per quarter.
According to JPMorgan’s analysis, Devon Energy’s cash return strategy suggests that it will return 53% of its FCF to investors, based on the mid-point of the buyback range, or 60% at the top-end of the range. This strategy highlights the company’s intention to prioritize deleveraging its balance sheet with the excess FCF.
In other recent news, Devon Energy reported fourth-quarter 2024 earnings that exceeded analyst expectations, with adjusted earnings of $1.16 per share, surpassing the consensus estimate of $0.98. The company also reported revenue of $4.4 billion, above the projected $4.17 billion. Devon’s oil production reached a record 398,000 barrels per day, exceeding guidance by 3%, and total production averaged 848,000 barrels of oil equivalent per day, marking a 16% increase from the previous quarter. Following these results, Devon’s board approved a 9% increase in the quarterly fixed dividend for 2025 to $0.24 per share.
Mizuho (NYSE:MFG) Securities adjusted its financial outlook for Devon Energy, raising the stock’s price target from $47.00 to $49.00 and reaffirming an Outperform rating. The revised price target reflects confidence in Devon’s financial strategy and shareholder value delivery. The company has expressed intentions to allocate up to 70% of its free cash flow to shareholder returns, including a base dividend increase and planned share buybacks. Additionally, Devon Energy concluded its operating partnership with BPX in the Eagle Ford (NYSE:F) region, aiming for drilling and completion savings to enhance asset performance. These developments are part of Devon’s strategic efforts to achieve its long-term debt target of $2.5 billion.
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