BMO Capital Downgrades Ovintiv Inc. (OVV) to Market Perform, 'Valuation Still a Discount, but Less Re-Rating Potential'

BMO Capital analyst Phillip Jungwirth downgraded Ovintiv Inc. (NYSE: OVV) from Outperform to Market Perform with a price target of $51.00 (from $56.00).

The analyst comments "Valuation Still a Discount, but Less Re-Rating Potential. We estimate Ovintiv shares trade at 3.7/3.2x 2023/24E EV/EBITDAX (NYMEX), which is a discount to our large cap (4.8/4.5x) and natural gas (4.9/3.9x) coverage, while in line with SMIDs (3.6/3.3x). FCF yield is 13.9% in 2023 (vs. 8.8% for large caps), but narrows to 10.6% in 2024 (vs. 8.4%) given higher cash taxes (US AMT; CAD). This less attractive FCF yield is what prompts our ratings change, and is before up to $300mm A&D spend to replenish inventory, which is near the lower end of peers. While we applaud higher capital returns initiated in 2022, we estimate 2023 yield is only 7.3%, in line with the large-cap E&P median, while below CVX/COP/XOM. Absent a competitive capital return yield, we see less of a re-rating case for the shares."

For an analyst ratings summary and ratings history on Ovintiv Inc. click here. For more ratings news on Ovintiv Inc. click here.

Shares of Ovintiv Inc. closed at $44.01 yesterday.

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