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Investing.com - Mizuho (NYSE:MFG) has reiterated an Outperform rating and $42.00 price target on SM Energy (NYSE:SM) as the company continues to integrate its recently acquired Uinta assets. Currently trading at $28.38, the stock appears undervalued according to InvestingPro analysis, which identifies multiple growth catalysts and maintains a "GOOD" financial health rating.
The investment firm notes that while SM Energy shares have outperformed peers since April’s lows, showing a strong 9.45% gain in the past week, the stock has still lagged year-to-date as investors seek more confidence in the company’s execution capabilities following the Uinta acquisition. Despite the recent volatility, InvestingPro data reveals the company maintains impressive fundamentals, including a low P/E ratio of 3.93x and robust revenue growth of 24.88%.
For the second quarter of 2025, Mizuho forecasts approximately 3% oil production above consensus estimates, though near the midpoint of company guidance, and anticipates significant free cash flow expansion in the second half of 2025 as production increases while capital expenditures decrease.
This improved cash flow should enable SM Energy to achieve its target of approximately 1.0x net leverage by year-end 2025, potentially shifting focus toward higher cash returns to shareholders in 2026.
Mizuho points out that SM Energy shares have significantly de-rated since January and now trade at a full turn discount to small and mid-cap exploration and production peers on 2026 estimated EV/EBITDX and approximately 300 basis points discount on free cash flow yield.
In other recent news, SM Energy reported its first-quarter 2025 financial results, surpassing earnings expectations with an earnings per share (EPS) of $1.76, compared to the forecasted $1.54. The company also reported revenue of $844.54 million, exceeding projections, and plans a 30% increase in oil production for the year. Despite these positive financials, SM Energy’s stock fell by 4.92% in after-hours trading, indicating other factors may be affecting investor sentiment. Analyst firm Raymond (NSE:RYMD) James raised its price target for SM Energy to $34, maintaining an Outperform rating, following the company’s earnings report and adjustments to the commodity price environment. The firm noted SM Energy’s increased lease operating expenses, which rose by 9% due to higher workover activities and increased water disposal costs. Raymond James forecasts second-quarter production at 200 thousand barrels of oil equivalent per day, aligning with SM Energy’s guidance. The company’s capital expenditure is maintained at $1.3 billion for the year, with a focus on debt reduction to achieve a 1x leverage by year-end. SM Energy’s strategy includes generating significant free cash flow and maintaining operational efficiency, even at lower oil prices.
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