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On Thursday, KeyBanc Capital Markets reiterated their Overweight rating on Viper Energy (NASDAQ:VNOM) with a stable price target of $62.00, aligning with the broader analyst consensus that sees potential upside with targets ranging from $52 to $70. According to KeyBanc analyst Tim Rezvan, the market seems to have overlooked the positive impact of the recent minerals dropdown from Diamondback (NASDAQ:FANG) Energy, which was more favorable for Viper Class A shareholders than anticipated. InvestingPro data shows that 5 analysts have recently revised their earnings estimates upward for the upcoming period.
Rezvan expressed surprise at the lackluster response from investors following the announcement, suggesting that the market’s reaction did not fully reflect the accretive nature of the transaction. The financing terms included the issuance of Class B shares to Diamondback, accounting for 76% of the funding, while an equity issuance covered 119% of the cash component, which was well received.
Looking ahead, Rezvan anticipates a stronger balance sheet for Viper Energy, which should enable the company to pursue further mergers and acquisitions. This outlook is supported by InvestingPro data showing a healthy current ratio of 7.24 and moderate debt levels. He also highlighted the company’s distribution forecast, which suggests a next twelve months (NTM) yield of 6.1%, based on a 75% payout of distributable cash flow allocated entirely to distributions. The company currently offers a dividend yield of 5.03% and has demonstrated impressive dividend growth of 127.78% over the last twelve months.
The analyst pointed out that Viper Energy stands out as a public minerals company with distinct advantages. Diamondback Energy’s ability to ensure organic production growth through its drilling activity over a more extensive acreage and minerals footprint, especially after the closing of the Endeavor transaction, positions Viper favorably.
In conclusion, Rezvan increased his earnings estimates for Viper Energy and reaffirmed the $62 price target for the company’s shares, signaling confidence in the stock’s potential moving forward. The company has demonstrated strong performance with a remarkable 61.73% return over the past year. For deeper insights into VNOM’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, along with 10+ additional ProTips and extensive financial metrics available on InvestingPro.
In other recent news, Viper Energy has been the focus of numerous analyst adjustments and has also announced significant financial developments. Raymond (NSE:RYMD) James has maintained an Outperform rating on Viper Energy but reduced the stock’s price target from $64.00 to $58.00, following the company’s recent equity raise and asset purchases. Similarly, Texas Capital Securities revised Viper Energy’s price target to $48.00 from $61.00, despite retaining a Buy rating. On the other hand, Truist Securities raised the stock’s price target to $78.00 from $71.00, reaffirming a Buy rating on the shares.
Viper Energy recently reported an average daily production of 29,859 barrels of oil per day in the fourth quarter of 2024, with total operating income for the quarter standing at $228.7 million. Additionally, the company has agreed to acquire equity interests of certain Diamondback subsidiaries in a transaction valued at $1.0 billion, plus approximately 69.6 million OpCo units. Viper has also entered into a separate agreement to acquire mineral and royalty interests from Morita Ranches Minerals LLC for approximately $211 million and around 2.4 million OpCo units.
These recent developments highlight Viper Energy’s strategic moves to expand its asset base and enhance its production capabilities, with analysts from various firms providing their assessments of the company’s recent activities and their anticipated impact on its financial performance.
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