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Investing.com - Mizuho has raised its price target on Diversified Energy Co. (NYSE:DEC) to $27.00 from $23.00 while maintaining an Outperform rating on the stock. The new target represents significant upside from the current price of $14.87, with analysts’ consensus ranging from $15 to $23. According to InvestingPro data, the stock has gained over 35% in the past six months despite recent volatility.
The price target increase follows Diversified Energy’s announcement of a $550 million acquisition of Canvas Energy, which expands the company’s Oklahoma asset base. Mizuho estimates the acquisition will provide approximately 11% accretion to 2026 cash flow from operations per share and 24% accretion to free cash flow per share. With a market capitalization of $1.2 billion and current EBITDA of $354 million, this acquisition represents a significant strategic move for the company. InvestingPro analysis reveals 8 additional key insights about DEC’s growth potential and financial health.
The Canvas acquisition brings assets with a higher liquids mix of approximately 57%, compared to Diversified’s standalone 27%, which is expected to improve cash margins even before accounting for potential operating cost synergies. The company maintains a notable 5.46% dividend yield, having consistently paid dividends for 9 consecutive years.
Diversified Energy plans to issue only about 3.4 million shares, representing approximately 4% of current shares outstanding, to help fund the transaction. The company will also utilize its partnership with Carlyle to issue approximately $400 million in asset-backed securities debt.
Mizuho notes that while the new debt will remain on Diversified’s balance sheet, the transaction is expected to be relatively neutral to the company’s pro forma Net Debt/EBITDA estimates, while current shareholders should benefit from the free cash flow per share accretion.
In other recent news, Diversified Energy has announced an asset-backed securities (ABS) funding agreement with Carlyle’s structured credit group, which could be worth up to $2 billion. This arrangement is aimed at facilitating larger scale deals of $250 million or more, with Carlyle retaining a residual equity interest in the ABS. Following this announcement, KeyBanc has reiterated its Overweight rating on Diversified Energy, maintaining a price target of $17.00. The decision came after meetings with Diversified Energy’s management in Oklahoma City. These developments are part of the company’s ongoing efforts to secure substantial financing for its operations.
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