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On Thursday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Murphy Oil Corp (NYSE:MUR) by reducing the stock’s price target to $37 from the previous $45 while still maintaining an Outperform rating. Currently trading at $26.93, the stock appears undervalued according to InvestingPro analysis, despite falling nearly 30% over the past year. The change comes after a review of the company’s recent performance and future prospects.
The reassessment followed a sell-side breakfast in New York City, which featured discussions with Murphy Oil’s newly-appointed CEO, Eric Hambly, and CFO, Tom Mireles. Hambly, who took over as CEO on January 1, has a robust background in exploration and production (E&P), including a nearly two-decade tenure at Murphy Oil, where he most recently served as COO. His expertise is particularly strong in offshore operations.
During the meeting, Hambly and Mireles emphasized Murphy Oil’s expanding operations offshore Vietnam and its unique exploration portfolio. They also reaffirmed the company’s dedication to its strategic plan, dubbed "Murphy 3.0," and its ongoing share buyback program, with approximately $50 million repurchased year-to-date, following recent market volatility.
The company’s leadership also shared insights on merger and acquisition strategies, indicating a possible offshore-focused acquisition in the next few years, while noting that currently, no assets in their portfolio are considered non-core.
Despite a disappointing first-quarter 2025 volume and operational expenditure guidance that led to an initial dip in stock performance, Murphy Oil’s shares have seen a rebound as market expectations adjusted. With a healthy gross profit margin of 60.6% and a P/E ratio of 10x, the company maintains solid fundamentals. Investors are now looking forward to the company’s execution in 2025 and the visibility of its long-term value proposition, which includes modest oil growth, spending about 50% of cash flow, maintaining a strong balance sheet, and capitalizing on exploration opportunities. For comprehensive analysis of Murphy Oil’s financial health and growth prospects, access the detailed Pro Research Report available on InvestingPro.
In other recent news, Murphy Oil Corporation reported its Q4 2024 earnings, which fell short of analyst expectations. The company posted an EPS of $0.35, significantly below the forecasted $0.69, and revenue of $670.96 million, missing the anticipated $763.43 million. Despite these challenges, Murphy Oil has made strides in reducing its total debt by approximately 60% since 2020, achieving its lowest net debt in over a decade. The company plans to allocate significant capital expenditure in 2025, focusing on existing assets and international exploration projects.
KeyBanc Capital Markets recently adjusted its outlook on Murphy Oil, reducing the price target to $37 from $50 but maintaining an Overweight rating. The firm cited robust free cash flow and potential high-margin oil growth from Vietnam as positive factors, despite operational challenges in the Gulf of Mexico. KeyBanc remains optimistic about the company’s prospects, highlighting Vietnam as a potential transformative catalyst. Murphy Oil’s dividend yield of 4.9% is viewed as sustainable, with the potential for repurchasing up to 9% of its market cap within the next two years.
Murphy Oil’s strategic plans for 2025 include a production forecast of 174.5 to 182.5 thousand barrels of oil equivalent per day and capital expenditures ranging from $1.135 to $1.285 billion. The company is also progressing with its Loc Devong development project in Vietnam, aiming for first oil in late 2026. Additionally, Murphy Oil plans to drill exploration wells in the Gulf of Mexico and Cote d’Ivoire, further underscoring its commitment to international exploration.
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