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Range Resources: Analysts Reduced Its Target Price

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On July 27, Suntrust Robinson reduced its target price on Range Resources (RRC) by $2 to $6. Suntrust Robinson kept its “hold” rating. On July 8, Suntrust Robinson and Goldman Sachs reduced their target prices by $4 and $3.5 to $8 and $7.5, respectively. On Monday, Susquehanna reduced its target price on the stock by $2.5 to $8.5.

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Range Resources’ target price

In the last trading session, MKM Partners, TD Securities, and Credit Suisse reduced their target prices on Range Resources stock by $2, $2, and $1 to $6, $5.5, and $8, respectively. The target price reduction came after the company’s second-quarter earnings results. Before the earnings results, Jefferies reduced its rating on Range Resources from “buy” to “hold.” Jefferies also reduced the target price on the stock by 58.8%.

Earnings result

On July 25, Range Resources reported an adjusted diluted EPS of 2 cents. The EPS was above analysts’ consensus estimates of 1 cent after the market closed. On July 26, Range Resources’ stock prices closed up about 0.8%. However, the EPS fell more than 90% from the last quarter and a year ago. The total production beat 7 million cubic feet of equivalent per day from the higher limit of management’s guidance. The production grew on a sequential and year-over-year basis. In the last quarter, Henry Hub natural gas prices were at the lowest level since the second quarter of 2016. The lower level could explain the decline in the EPS. Henry Hub operates with a production mix of 68.8% in natural gas.

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Guidance

In the third quarter, the company’s management expects the production to be 2.25–2.26 billion cubic feet of equivalent per day. Range Resources kept the adjusted production guidance almost unchanged for 2019. However, other natural gas–weighted stock, like Cabot Oil & Gas (COG), lowered their production guidance. As a result, Cabot Oil & Gas’s stock prices were impacted negatively. In the third quarter, the price differential to NYMEX natural gas prices is at -$0.29. Every one-cent move in Henry Hub natural gas prices would impact Range Resources’ stock prices.

For 2019, based on the company’s guidance, natural gas’s pre-hedge price differential will likely be 15 cents–20 cents less than NYMEX prices. Oil prices will likely be at a negative price differential between $6 and $8 per barrel to WTI crude oil prices. The NGL prices will likely be $1.20–$1.30 per barrel less than the Mont Belvieu prices. 

If oil and natural gas prices trend lower for the rest of 2019, it might impact the company’s profitability. Analysts might have reduced their target prices on Range Resources due to the possibly lower price trend.

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