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On Friday, RBC Capital Markets adjusted its price target on ConocoPhillips (NYSE:COP) stock, reducing it from $120.00 to $115.00, while retaining an Outperform rating. The adjustment reflects a strategic pivot by the company as it adapts to market conditions and a reassessment of future cash flow. Currently trading at $85.59, near its 52-week low, InvestingPro analysis suggests the stock is undervalued, with a P/E ratio of 10.8 and strong financial health metrics.
Scott Hanold of RBC Capital Markets noted that ConocoPhillips is navigating strategic choices, particularly regarding shareholder returns anticipated in 2025 and the timing of free cash flow (FCF) inflection points in the coming years. The company’s shareholder payout strategy remains anchored by a minimum of 30% of cash flow from operations (CFO), but the target for the current year is shifting towards a roughly 45% ratio instead of a fixed quantum backstop. With a current dividend yield of 3.64% and a remarkable 55-year streak of consecutive dividend payments, as reported by InvestingPro, the company maintains a strong track record of shareholder returns.
The change in the shareholder payout target comes amid recent market volatility and expected working capital challenges. This strategic shift is aimed at providing the company with greater flexibility and is likely to result in less market debate over time.
Hanold’s report indicates that the reduction in the price target to $115 is directly related to a decrease in estimated cash flow per share (CFPS). The new target reflects a conservative approach in light of the current financial environment and the company’s strategic adjustments.
ConocoPhillips has not yet publicly responded to the revised price target. The company’s stock performance and investor sentiment in the coming weeks will likely be influenced by this new valuation and the ongoing execution of its financial strategy. With a market capitalization of $107.89 billion and sufficient cash flows to cover interest payments, InvestingPro subscribers can access 8 additional key insights and a comprehensive Pro Research Report, part of the platform’s coverage of 1,400+ US equities.
In other recent news, ConocoPhillips reported a strong financial performance for the first quarter of 2025, surpassing analysts’ expectations. The company achieved earnings per share of $2.09, exceeding the forecast of $1.98, and reported revenue of $16.09 billion, which was above the anticipated $15.77 billion. ConocoPhillips also announced the successful integration of Marathon Oil (NYSE:MRO), which is ahead of schedule and contributing to faster synergies. At its annual meeting, shareholders voted on several key proposals, including the election of directors and the ratification of Ernst & Young LLP as the independent registered public accounting firm for 2025. However, a proposal to amend the Certificate of Incorporation to eliminate supermajority voting provisions did not receive the required approval. The company has also revised its capital expenditure and operating cost guidance downward, indicating improved efficiency. Additionally, ConocoPhillips is maintaining its full-year production guidance, expecting low single-digit growth. These developments reflect the company’s strategic focus on operational efficiency and shareholder value.
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