EOG Resources completes $5.6 billion acquisition of Encino Acquisition Partners
On Tuesday, Truist Securities adjusted its stance on Kimbell Royalty Partners LP (NYSE:KRP), downgrading the stock from Buy to Hold and reducing the price target from $22.00 to $16.00. The firm’s analysts cited concerns over the company’s share growth volatility and a high earnings multiple compared to its larger mineral peers. According to InvestingPro data, KRP currently trades at an EV/EBITDA of 8.02x, with the stock recently experiencing an 8.62% decline over the past week and trading near its 52-week low of $14.29.
The downgrade comes amidst expectations of stable production but growing apprehension regarding the potential for decreased activity should commodity prices continue to struggle. While Truist Securities warns about potential reduced distributions, InvestingPro data shows KRP maintains an impressive 93.43% gross profit margin and has consistently paid dividends for nine consecutive years, currently offering an 11.1% yield.
In their statement, Truist Securities acknowledged that Kimbell Royalty Partners continues to provide shareholders with a decent quarterly distribution. However, the firm emphasized the uncertainty faced by the company due to the volatility in share growth and the challenges posed by the current commodity price environment.
The new price target of $16.00 set by Truist Securities reflects a more conservative valuation of Kimbell Royalty Partners, taking into account the factors that could impact the company’s financial performance. The downgrade to a Hold rating suggests that the firm advises investors to maintain their current positions without increasing their holdings.
Kimbell Royalty Partners, which is known for its ownership of oil and natural gas mineral and royalty interests across the United States, will be navigating the market with this updated outlook from Truist Securities. The company’s ability to sustain its distributions in the face of these headwinds will be closely watched by investors and industry analysts alike.
In other recent news, Kimbell Royalty Partners reported a challenging fourth quarter for 2024, with earnings per share (EPS) significantly missing expectations. The company posted an EPS of -$0.48, falling short of the forecasted $0.19, while revenue also missed projections, coming in at $66.71 million compared to the expected $76.42 million. This performance reflects operational challenges despite achieving record production levels. Additionally, Kimbell Royalty Partners continues to focus on strategic acquisitions, including a $230 million deal aimed at strengthening its position in the oil and gas royalty sector. The company has maintained a conservative approach to its 2025 production guidance, with an expected midpoint of 25,500 barrels of oil equivalent per day.
In response to these developments, Raymond (NSE:RYMD) James downgraded Kimbell Royalty Partners’ stock rating from Strong Buy to Market Perform. This decision was influenced by the company’s fourth-quarter results and a production guidance for 2025 that was 4-5% lower than expectations. The firm also revised its distribution estimate for 2025 to approximately $1.63 per unit, despite this figure representing a yield of over 10%. Raymond James cited potential near-term challenges, such as impending Series A redemptions, as factors contributing to the downgrade. These recent developments highlight the financial and operational pressures faced by Kimbell Royalty Partners.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.