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On Monday, Raymond (NSE:RYMD) James adjusted its stance on Kimbell Royalty Partners LP (NYSE:KRP) stock, downgrading the rating from Strong Buy to Market Perform. The change in rating follows the company’s fourth-quarter results, which have led the analysts to adopt a more cautious outlook on the stock. According to InvestingPro data, KRP currently trades at $15.32, near its 52-week low of $14.93, while maintaining impressive gross profit margins of 93%.
Raymond James has been a long-time advocate of Kimbell Royalty Partners, particularly praising the management and business model since the company’s initial public offering in 2017. However, the firm has decided to take a step back after evaluating the latest quarterly earnings and production guidance for the year 2025. While the company wasn’t profitable in the last twelve months, InvestingPro analysis indicates analysts expect profitability to return this year, with a forecasted EPS of $0.86 for 2025.
The 2025 production guidance presented by Kimbell Royalty Partners, estimated at 25.5 million barrels of oil equivalent per day (Mboe/d), was found to be 4-5% lower than Raymond James and consensus estimates from other analysts. This shortfall in expected production has contributed to a downward revision of the firm’s distribution forecast for 2025.
The revised distribution estimate by Raymond James for 2025 now stands at approximately $1.63 per unit. Despite this figure representing a yield of over 10%, the analysts at Raymond James have identified more compelling yield opportunities within the sector. Consequently, the firm has adjusted its recommendation, signaling less optimism about Kimbell Royalty Partners’ near-term prospects.
Moreover, the analysts have highlighted potential near-term challenges for the company, such as the impending Series A redemptions. These financial obligations could pose additional headwinds for Kimbell Royalty Partners, further justifying the downgrade in the stock rating by Raymond James.
In other recent news, Kimbell Royalty Partners reported disappointing financial results for the fourth quarter of 2024, with earnings per share (EPS) and revenue falling short of expectations. The company posted an EPS of -$0.48, significantly below the forecasted $0.19, and revenue came in at $66.71 million, missing the expected $76.42 million. Despite these setbacks, Kimbell achieved record production levels and remains focused on strategic initiatives, including a recent $230 million acquisition. Analysts from firms like Tuohy Securities and KeyBanc Capital Markets have been closely monitoring these developments, noting the operational challenges the company faces. Kimbell has maintained a conservative approach to its 2025 guidance, with an expected production midpoint of 25,500 barrels of oil equivalent per day. The company has also announced a cash distribution of $0.4 per common unit, representing a 100% return of capital. As Kimbell navigates these operational and market pressures, its strategic focus on acquisitions and production growth remains critical.
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