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On Tuesday, Piper Sandler adjusted its price target for Black Stone Minerals (NYSE:BSM) shares, reducing it to $15.00 from the previous $16.00, while retaining a Neutral rating on the stock. The firm’s analyst provided a rationale for the new price target, basing it on a 7-year Dividend Discount Model (DDM) with an 11% cost of equity. According to InvestingPro data, the company maintains impressive gross profit margins of 86% and trades at a P/E ratio of ~13x.
The analyst highlighted several key catalysts that could affect the stock in the near future. These include an update on Aethon Energy’s activity in East Texas, results from Austin Chalk wells, and further information on Black Stone Minerals’ efforts to facilitate solar installations using their surface rights. Additionally, the company’s plans to purchase carbon credits to offset emissions were noted as a potential positive driver. InvestingPro analysis reveals the company has maintained dividend payments for 11 consecutive years, currently offering a substantial 10.5% yield.
However, the analyst also pointed out risks that could impact the company’s performance. A significant concern is the possibility that Black Stone Minerals may face challenges in securing and marketing additional mineral interests, which could materially affect future earnings. Moreover, there is the industry-wide risk of oil and natural gas prices weakening compared to forecasts, which could also pose a threat to the company’s financial health. Despite these risks, the company maintains a strong financial position with a beta of 0.5, indicating relatively low price volatility.
Piper Sandler’s revised price target reflects a cautious stance on Black Stone Minerals, balancing the potential catalysts with the inherent risks in the energy sector. The firm’s analysis suggests that while there are opportunities for growth, there are also significant challenges that could hinder performance. InvestingPro analysis indicates the stock is currently slightly undervalued, with additional insights available in the comprehensive Pro Research Report, which covers over 1,400 US stocks.
In other recent news, Black Stone Minerals reported its fourth-quarter 2024 earnings, revealing a revenue of $83.73 million, which fell short of the forecasted $114.73 million. Despite the revenue miss, the company’s earnings per share (EPS) aligned with analyst expectations at $0.18. Black Stone Minerals maintained a distribution of $0.375 per unit, reflecting stable cash flow. The company reported a net income of $46.3 million for the quarter and $271.3 million for the full year. The adjusted EBITDA for the quarter was $90.1 million, contributing to a full-year figure of $380.9 million. Additionally, Black Stone Minerals announced a change in its certifying accountant, switching from Ernst & Young LLP to Deloitte & Touche LLP. This change was made without any disagreements or reportable events with the previous firm. The company continues to focus on its acquisition strategy, particularly in the Gulf Coast region, and projects a positive outlook for 2025.
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