Pioneer Natural Resources Co is Gonna Explode (Chart of the Day 19)

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:

Balance Sheet

All numbers in thousands

Period Ending 12/31/2018 12/31/2017 12/31/2016 12/31/2015
Current Assets
Cash And Cash Equivalents 896,000 1,118,000 1,391,000
Short Term Investments 1,213,000 1,441,000
Net Receivables 821,000 652,000 521,000 926,000
Inventory 242,000 212,000 181,000 155,000
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
Goodwill 270,000 272,000 272,000
Intangible Assets
Accumulated Amortization
Other Assets 132,000 99,000 143,000
Deferred Long Term Asset Charges
Total Assets 17,003,000 16,459,000 15,154,000
Current Liabilities
Accounts Payable 1,610,000 1,262,000 853,000 867,000
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
Other Liabilities 1,313,000 1,754,000 2,110,000
Deferred Long Term Liability Charges
Minority Interest 5,000 7,000 7,000
Negative Goodwill
Total Liabilities 5,724,000 6,048,000 6,779,000
Stockholders’ Equity
Misc. Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock 2,000 2,000 2,000 2,000
Retained Earnings 3,470,000 2,547,000 1,728,000 2,298,000
Treasury Stock -423,000 -249,000 -218,000 -199,000
Capital Surplus 9,062,000 8,974,000 8,892,000 6,267,000
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 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.

-Michael Hoeft

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