Raymond James maintains outperform rating for Devon Energy stock
Investing.com
Published Jun 03, 2025 06:53AM ET
On Tuesday, Raymond James analysts reaffirmed their Outperform rating for Devon Energy stock (NYSE: NYSE:DVN) with a price target of $40. This decision follows the company's recent first-quarter results and subsequent updates to its 2025 guidance. According to InvestingPro data, Devon Energy currently trades at $31.14, with analysts' targets ranging from $31 to $66, suggesting potential upside. The stock appears undervalued based on InvestingPro's Fair Value analysis.
Devon Energy recently surpassed expectations in capital expenditure and provided improved guidance for the fiscal year 2025. On May 5, the company announced an agreement to sell its equity interest in the Matterhorn Pipeline for approximately $375 million. The company maintains strong financials with a healthy 52.4% gross profit margin and has consistently paid dividends for 33 consecutive years, as highlighted in InvestingPro 's analysis.
The analysts at Raymond James have updated their estimates following the company's second-quarter guidance. They project a second-quarter production of about 819,000 barrels of oil equivalent per day (Mboe/d), aligning with market expectations, and estimate second-quarter spending to be around $1 billion, also in line with market forecasts. With a market capitalization of approximately $20 billion and an attractive EV/EBITDA ratio of 3.52x, Devon Energy demonstrates strong value metrics.
For the full year, Raymond James has slightly increased its production estimate for Devon Energy from approximately 817 Mboe/d to 819 Mboe/d. Additionally, the firm's capital expenditure estimate for the year has been reduced by about 3% to $3.8 billion.
The analysts highlighted that Devon Energy's 2025 free cash flow yield and enterprise value to EBITDA ratio are attractive compared to its large-cap peers, reinforcing their positive outlook on the stock.
In other recent news, Devon Energy reported its first-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $1.21 compared to the forecast of $1.17. The company also exceeded revenue forecasts, reporting $4.45 billion against the expected $4.34 billion. Devon Energy's oil production exceeded guidance, reaching 388,000 barrels per day, contributing to a strong free cash flow of $1 billion, the highest since the third quarter of 2022. The company announced a $1 billion business optimization plan aiming for pre-tax free cash flow by the end of 2026, with specific targets in capital efficiency, commercial opportunities, production optimization, and corporate cost savings.
Additionally, Devon Energy expects to enhance its cash balance with proceeds from the Matterhorn divestiture, which is set to close in the second quarter of 2025. JPMorgan analysts maintained a Neutral rating on Devon Energy stock, with a $40 price target, following discussions with the company's new CEO and CFO. The company has already secured $200 million in margin improvement from renegotiated contracts and $100 million in capital expenditure savings, projecting a $400 million pre-tax cash flow uplift by the end of 2025. Devon Energy plans to maintain its 2025 activity plan, citing favorable drilling returns and efficiency, but may consider more aggressive actions if oil prices drop closer to $50 per barrel. The company remains confident in its liquidity to manage upcoming debt maturities, projecting a free cash flow yield of 15% in 2025 and 14% in 2026.
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Written By: Investing.com
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