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Investing.com - Morgan Stanley downgraded Ovintiv Inc. (NYSE:OVV) from Overweight to Equalweight on Monday, while reducing its price target to $48.00 from $52.00. The new target aligns closely with InvestingPro’s Fair Value calculation, while the broader analyst consensus remains bullish with targets ranging from $42 to $67.
The downgrade follows Ovintiv’s 11% outperformance against oil exploration and production peers year-to-date, which Morgan Stanley attributes to solid execution and capital efficiency improvements.
Morgan Stanley notes that Ovintiv currently trades at a 2025 free cash flow yield of 14%, near the oil E&P peer median of 13%, while offering a shareholder return yield of 7% compared to the peer average of 8%.
The investment bank expressed concern about Ovintiv’s 2025 estimated net debt to EBITDAX ratio of 1.2x, which exceeds the peer median of 0.8x, suggesting higher leverage than competitors.
Morgan Stanley’s revised $48 price target represents a 50/50 blend of net asset value ($49/share) and EV/EBITDAX-based valuation ($49/share), with a target EV/EBITDA multiple of 4x compared to the NAV implied multiple of 4.9x.
In other recent news, Ovintiv Inc. reported second quarter earnings that surpassed expectations, with earnings per share reaching $1.18, exceeding analyst estimates of $0.98. The company generated $1.01 billion in cash from operating activities and achieved $392 million in non-GAAP free cash flow after capital expenditures of $521 million. Additionally, Ovintiv raised its full-year production guidance while lowering its capital expenditure forecasts. The company’s production averaged 615 thousand barrels of oil equivalent per day, surpassing its guidance across all product categories. These developments reflect strong operational performance and efficient capital management. Analyst firms noted the positive earnings report and production guidance adjustments. Investors are likely to be interested in these recent developments as they consider their positions.
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