UBS Downgrades Southwestern Energy (SWN) to Sell

UBS downgraded Southwestern Energy (NYSE: SWN) from Neutral to Sell with a price target of $9.00 (from $7.00) followign the recent outperformance.

Analyst William Featherston commented, "Following SWN's recent outperformance (+33% vs. gassy resource peers' +11% over the past 30 days) & assuming current futures strip prices, we estimate it is now trading at 2016-17E EV/EBITDX multiples of ~23.9x & ~12.0x…well above its historical avg of 7.2x (see Figure 5). This rally has dramatically exceeded the ~$0.10/MMBtu increase in the 2017 futures strip over this time period, leaving SWN reflecting a recovery to a much higher natural gas price. And while we expect much higher 2017 natural gas prices, SWN already seems to reflect a recovery to ~$3.50/MMBtu or higher (above the 2017 curve of $2.84/MMBtu and our normalized forecast of $3.25/MMBtu) despite an over-leveraged balance sheet, declining production, and avg cash flow per debtadjusted share growth from 2016-20 (see Figures 4 & 6). As such, we are downgrading SWN from Neutral to Sell."

For an analyst ratings summary and ratings history on Southwestern Energy click here. For more ratings news on Southwestern Energy click here.

Shares of Southwestern Energy closed at $10.47 yesterday.

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