Stifel Reiterates Buy Rating on Diamondback Energy (FANG)
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Stifel analyst Derrick Whitfield reiterated a Buy rating and $236.00 price target on Diamondback Energy (NASDAQ: FANG)
The analyst comments "We are primarily focused on two catalysts. First, we are focused on management executing against its 2022 return of capital strategy. With today's announcement, management noted that it plans to return at least 75% of its free cash flow. Importantly, we project 2022 FCF of >$5.4B at strip pricing and believe management will exceed its commitment to return 75% of FCF to stockholders for the balance of 2022 as near-term (before 2026) debt retirement opportunities are minimal. Net-net, we could see a +70% return of capital to shareholders for 2022, equating to a share repurchase/dividend yield of ~18%, and we believe the sector's return of capital mandate is critical for equity performance at higher commodity prices as it links the commodity with dividends and/or share repurchases. Second, we expected synergies in ancillary business lines from past QEP and Guidon acquisitions. We remain constructive on those acquisitions as they were accretive to cash flow per share and leverage metrics, and lengthen value-accretive opportunities in Diamondback's ancillary businesses, including VNOM's mineral acquisitions."
Shares of Diamondback Energy closed at $122.29 yesterday.
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