Wells Fargo Counters Negative Barron's Article, See Buying Opp in Linn (LINE) (LNCO)

May 6, 2013 11:46 AM EDT Send to a Friend
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Price: $12.02 +0.50%

Rating Summary:
    11 Buy, 9 Hold, 2 Sell

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    Up: 15 | Down: 38 | New: 13
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Shares of Linn Energy (Nasdaq: LINE) and Linn Co (Nasdaq: LNCO) traded lower on Monday following a negative article in Barron's. Barron's said Linn Energy "may be the country's most overpriced large energy producer." The article claims Linn Energy's 7.5% dividend yield has supported a high multiple, even as fundamentals have faded. "If the payout is cut, look out below," wrote Barron's.

In response, analyst Praneeth Satish of Wells Fargo said the Barron’s related sell-off is a buying opportunity, as the article "brings up old points of contention." At issue are the company's hedges, maintenance capex, and weak Q1 results.

"While clearly some of the practices that LINE is employing are on the aggressive side, we believe the Barron’s article significantly overstates the effect on LINE's DCF. We continue to believe LINE’s distribution is secure and poised to grow at a mid-single-digit annual growth rate over the next five years. Finally, we continue to believe the LNCO financing vehicle provides the company with a competitive advantage and could help both support distribution growth and improve Linn's leverage ratios over the coming years,” said Satish.

Wells Fargo has a Buy rating on Linn Energy with a price target of $40-$44.

For an analyst ratings summary and ratings history on LINN Energy (Nasdaq: LINE) click here. For more ratings news on LINN Energy click here.

Shares of LINN Energy closed at $38.44 yesterday.

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