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On Monday, Mizuho (NYSE:MFG) Securities initiated coverage on Kimbell Royalty Partners LP (NYSE:KRP) with a Neutral stock rating and a price target of $16.00. The new coverage is based on the company’s position in the market, with analysts noting Kimbell Royalty Partners’ diversified royalty minerals portfolio across multiple U.S. basins. Currently trading at $14.07, the stock sits near its 52-week low of $13.24, according to InvestingPro data. The firm’s assets are recognized for having a favorable proven developed producing (PDP) base decline rate and a future development inventory that extends beyond a decade.
The analysts observed that Kimbell Royalty Partners operates in a sector driven by mergers and acquisitions, which places a premium on scale. With a market capitalization of $1.52 billion and impressive gross profit margins of 93.43%, KRP maintains strong operational efficiency. However, they pointed out that KRP’s asset base, which is more natural gas-focused and has lower margins compared to its mineral peers, along with its relative market capitalization size, could make it challenging for the company to pursue future acquisitions. This is particularly relevant as the company’s balance sheet leverage is expected to increase amidst a potentially volatile commodity market environment, though InvestingPro data shows the company currently operates with moderate debt levels and maintains a healthy current ratio of 6.69.
Despite trading at a discount to its Royalty peers based on 2025-2026 estimated enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), the analysts believe that the discount is justified. They attribute this to Kimbell Royalty Partners’ mix of inventory and reserves, as well as its multi-basin portfolio. The firm’s current market position and future outlook have been key factors in determining the Neutral rating and $16 price target. Notably, KRP offers an attractive dividend yield of 11.37%, and while currently not profitable, analysts expect the company to return to profitability this year. For deeper insights into KRP’s financial health and valuation metrics, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks.
In other recent news, Kimbell Royalty Partners reported disappointing fourth-quarter 2024 earnings, with an earnings per share (EPS) of -$0.48, significantly missing the forecast of $0.19. Revenue also fell short, coming in at $66.71 million compared to the expected $76.42 million. Following these results, Raymond (NSE:RYMD) James downgraded Kimbell Royalty Partners from Strong Buy to Market Perform, citing a cautious outlook due to the company’s lower-than-expected production guidance for 2025. Truist Securities also downgraded the stock from Buy to Hold, reducing the price target to $16.00, reflecting concerns over share growth volatility and a high earnings multiple. Despite the challenges, Kimbell Royalty Partners continues to focus on high-quality property acquisitions, with a recent $230 million acquisition and a primary equity offering. The company’s conservative production guidance for 2025 estimates a midpoint of 25,500 barrels of oil equivalent per day. Analysts at Raymond James noted potential near-term challenges, including financial obligations related to Series A redemptions, which could further impact the company’s financial performance.
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