BofA says BUY
Bank of America Analysts have put a BUY rating on Pioneer Natural Resources Co (NYSE: PXD) with a share price target of $215. I wholeheartedly agree with them.
Pioneer Natural Resources Co is an oil and gas producer that primarily operates in the Permian Basin and Eagle Ford Shale. Their exposure to the core of the Midland Spraberry/Wolfcamp oil fields and the company’s impressive balance sheet give Pioneer the flexibility to either hunker down and ride out further declines in oil prices or potentially ramp up production if oil prices turn higher.
BofA’s Analysts say that the biggest issue for Pioneer looking forward is how management balances revenue growth and capital returns.
What Does the PXD Balance Sheet Look Like?
Well, funny you should ask…Here is the Annual Balance Sheet for the last 4 years through fiscal year-end 2018:
All numbers in thousands
|Cash And Cash Equivalents||–||896,000||1,118,000||1,391,000|
|Short Term Investments||–||1,213,000||1,441,000||–|
|Other Current Assets||–||34,000||31,000||722,000|
|Total Current Assets||–||3,007,000||3,298,000||3,194,000|
|Long Term Investments||–||66,000||420,000||–|
|Property Plant and Equipment||–||13,528,000||12,370,000||11,545,000|
|Deferred Long Term Asset Charges||–||–||–||–|
|Short/Current Long Term Debt||–||449,000||485,000||448,000|
|Other Current Liabilities||–||338,000||138,000||66,000|
|Total Current Liabilities||–||2,128,000||1,566,000||1,462,000|
|Long Term Debt||–||2,283,000||2,728,000||3,207,000|
|Deferred Long Term Liability Charges||–||–||–||–|
|Misc. Stocks Options Warrants||–||–||–||–|
|Redeemable Preferred Stock||–||–||–||–|
|Other Stockholder Equity||–||–||–||–|
|Total Stockholder Equity||–||11,274,000||10,404,000||8,368,000|
|Net Tangible Assets||–||11,004,000||10,132,000||8,096,00|
Crunching the Numbers
Look at how their Net Tangible Assets have been climbing year after year. And they’ve done this largely by trimming their liabilities every year at least since 2015. This evidence suggests that these guys simply know how to run and grow a company. True, their P/E is 25, but given the stock’s performance overall and the projections and their market cap and growth rate, that isn’t necessarily high.
In fact, even a number like 25 or even a bit higher with a stock like PXD in my humble estimation reflects that there’s still enough earnings compared to what we’re paying today.
Indeed, 12 of 16 analysts surveyed on Enbulletin.com have rated the stock a BUY.
Technicals Look Constructive
Not only has the stock bounced solidly off long-term support of 120 on the monthly chart, but we are also seeing bullish divergence on the MACD. We are not super-high on the Bollinger Bands, which is a secondary or perhaps tertiary piece of bullish evidence. However, it still is supportive of a rally as is the fact that the Stochastics/RSI indicator is coming off of oversold on the long-term monthly chart as well.
Dividend & Price Target
This company went from paying a 4c per quarter dividend in 2017 to a 16c per quarter dividend today, a four-fold increase. This is especially attractive to main street investors (as well as wall streeters) and shows the robustness of their vision and success in their industry as we look ahead. Frankly, I think BofA’s target is pretty right on. 200 is a good moderate target I believe, yet we could see 215 or higher in the future.