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On Wednesday, Raymond (NSE:RYMD) James analyst Justin Jenkins adjusted the price target for Aris Water Solutions Inc (NYSE:ARIS), reducing it to $30.00 from the previous $33.00. Despite the decrease, Jenkins maintained an Outperform rating on the company’s shares. Currently trading at $20.88, InvestingPro analysis suggests the stock is undervalued, with analyst targets ranging from $28 to $35. The analyst highlighted Aris Water Solutions as a prominent early player in the Permian water services industry, notably for its direct leverage to the growing Delaware volume and water recycling adoption.
Jenkins noted that while there is growing market concern regarding the Delaware Permian volume outlook, especially with West Texas Intermediate (WTI) crude oil prices falling below $60 per barrel, Aris Water Solutions’ relative positioning and customer base remain strengths. The company’s solid fundamentals are reflected in its 11.05% revenue growth and healthy gross profit margin of 59.35%. Operating with a moderate debt-to-equity ratio of 1.34, the company’s financial flexibility and capital expenditure optionality align well with current investor preferences. For deeper insights into ARIS’s financial health metrics and growth potential, InvestingPro subscribers have access to comprehensive analysis and additional ProTips.
The analysis acknowledged the challenges of further consolidation within the fragmented water services sector, which requires careful management in the face of market volatility. Jenkins expressed surprise at the stock’s significant decline on the day, which contrasted with the broader midstream sector’s slight gains and the flat to mixed performance of the energy sector overall.
Despite the recent sell-off, which saw Aris Water Solutions’ stock trading at one of the lower multiples within Raymond James’ coverage area—around 6 times its estimated 2027 enterprise value to EBITDA—Jenkins defended the stock. The company has demonstrated strong performance with a 66.79% return over the past year, while maintaining an EBITDA of $189.07M. He reiterated the Outperform rating, suggesting confidence in the stock’s potential despite the lowered price target and current market conditions. Get access to the full ARIS research report and 8 additional ProTips with an InvestingPro subscription.
In other recent news, Aris Water Solutions Inc. reported its Q1 2025 financial results, exceeding both earnings and revenue expectations. The company posted an earnings per share of $0.35, surpassing the forecast of $0.30, and achieved revenue of $120.49 million, higher than the anticipated $114.12 million. Despite these positive results, the stock experienced a decline, which might be due to concerns regarding future guidance and external economic factors. Additionally, Aris Water Solutions achieved record volumes in produced water handling and water solutions, reflecting strong demand and operational efficiency. The company reported an adjusted EBITDA of $56.5 million, marking a 4% sequential and 6% year-over-year increase.
In terms of future guidance, Aris Water Solutions anticipates potential headwinds from commodity prices, which could impact future performance. The company also noted high net debt levels as a concern for investors. On the analyst front, Moody’s upgraded the company’s credit rating from B1 to B2, indicating a positive outlook on its financial stability. The company is actively monitoring commodity price impacts and tariff uncertainties as it plans for the remainder of the year.
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