RBC raises Kodiak Gas Services stock target on strong market

RBC Capital Markets has raised its price target for Kodiak Gas Services Inc (NYSE: KGS), a provider of natural gas compression services, from $30.00 to $31.00 while maintaining an Outperform rating.

The adjustment follows the company's second-quarter earnings and 10Q report.

The firm believes that the natural gas compression market is robust and presents a favorable environment for growth. RBC Capital sees the recent decline in KGS's share price as an opportunity for investors, highlighting the company's commitment to capital discipline and the increasing demand for natural gas, which is expected to lead to higher needs for compression horsepower (HP (NYSE:HPQ)).

Kodiak Gas Services' strategy of having its new unit deliveries contracted through 2025 was also noted as a positive factor, reducing risks associated with the company's operations. The firm's updated price target reflects higher estimates based on these observations.

Meanwhile, Kodiak Gas Services has been the subject of several analyst updates. Truist Securities raised its price target for Kodiak Gas to $35, citing increased demand for the company's compression services and operational efficiency. Similarly, Goldman Sachs maintained a Buy rating on Kodiak Gas with a steady price target of $33, following the company's second-quarter results. Stifel also expressed confidence in the company's prospects, lifting the price target from $31 to $35, despite a 10% drop in the company's stock price.

In financial news, Kodiak Gas reported an EBITDA of $154 million, closely aligning with expectations. The company's management indicated a run-rate EBITDA of $162 million, considering adjustments for non-recurring items. The company's strong financial performance was further highlighted by an 8% increase in its quarterly cash dividend to $0.41 per share for the second quarter of 2024.

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