Houston-based Coterra Energy Inc. (NYSE:CTRA) is one of the overlooked stocks in the S&P 500 Index (SPX) that often misses the limelight. Coterra Energy belongs to the lucrative oil and gas sector, boasts an above-average dividend yield, and is a profitable company. CTRA shares have gained 12.5% in the past year. Wall Street analysts are bullish on CTRA stock and see attractive upside potential in the months ahead.
Coterra recently announced a quarterly dividend of $0.21 per share, up 5% year-over-year and reflecting a current yield of 4.43%. Plus, Coterra repurchased 1.1 million shares for $29 million during Q4 2023. The company intends to return more than 50% of its annual free cash flows to shareholders.
Key Notes About Coterra Energy
Coterra is a diversified energy company operating some of the best oil assets and natural gas assets in the U.S. The company’s diverse businesses help it to mitigate the volatility of industry cycles.
Moreover, Coterra follows a disciplined capital investment strategy, coupled with strong cash flow generation, which enables it to consistently deliver greater rewards to shareholders. Coterra’s exploration and production operations are based in the Permian Basin, Anadarko Basin, and Marcellus Shale.
In 2023, Coterra’s net production from the Permian Basin was 233 MBoe (thousand barrel of oil equivalent) per day, which is also equivalent to 35% of its total production for the year. Meanwhile, net production in the Marcellus Shale of 377 MBoe per day accounted for 57% of total equivalent production. Further, net production in the Anadarko Basin was 56 MBoe per day, contributing 8% of its total equivalent production for the year.
Coterra’s Impressive Q4 FY23 Results
In the fourth quarter of Fiscal 2023 results, Coterra exceeded its own guidance for total barrels of oil equivalent and oil production. Also, Coterra exceeded its full-year guidance for Boe and oil volumes by 5% and 10%, respectively. The company posted adjusted earnings of $0.52 per share on revenues of $1.60 billion in Q4.
Coterra is forecasting a 6% fall in Marcellus’ natural gas volumes in 2024 owing to 55% planned cuts in investments to skirt the falling gas prices. Nonetheless, Coterra has contingency plans in place to boost production in case the market improves.
For Fiscal 2024, the company has guided for capital expenditure between $1.75 and $1.95 billion, with the mid-point of the outlook indicating a 12% reduction compared to 2023. A majority of the capex will be directed toward the Permian and Anadarko Basins while Coterra plans to strategically cut its investment in the Marcellus Shale.
Is Coterra Energy a Good Stock to Buy?
On March 7, Piper Sandler analyst Mark Lear lifted the price target on CTRA to $35 (31.8% upside) from $33. Lear is impressed by Coterra’s Q4 print and the strategic capex plans. The analyst is bullish about the gas sector and rates Coterra a Buy.
Overall, CTRA stock has a Strong Buy consensus rating with 14 Buys and one Hold rating on TipRanks. The average Coterra Energy price target of $32.67 implies 23% upside potential from current levels.
Ending Thoughts
Coterra Energy is a pure-play oil and gas company with solid cash flows and attractive shareholder returns. Investors looking for a consistent income stream with sound financials can consider adding Coterra Energy to their portfolios. Coterra Energy is well-positioned to benefit from the ongoing oil and gas demand and an uptick in prices going forward.
