Though Encana Corp. (NYSE: ECA) closed out the week strong, with a 5% gain to $3.95 on Friday alone, it was actually up some 26% from the prior week. Jefferies already had a Buy rating on Encana, but the firm added the stock to its Franchise Picks List last week.
The $8 price target from Jefferies would still leave an implied 100% upside, if the call lives up to expectations. Encana is now said to be a well-funded outfit with high-quality assets, and trading at a sharp discount to its $8 implied value.
Jefferies said it is an “edgier pick” due to current leverage and risk to closing its DJ sales. The attraction here was threefold: the strength of its Midland Basin crown jewel asset, capital efficiency with minimal output declines despite a reduced budget and providing detail on the lack of a need for equity funding.
S&P Capital IQ has a Buy rating on Encana as well, but its report last Thursday had just a $5.00 price target. That comes with a High risk assessment rating. The firm’s report said:
Encana is positioning itself to take advantage of an eventual rebound in commodities. ECA has shown its ability to cut costs, and pay down debt via noncore asset sales. Longer term, we still favor ECA’s move toward more liquids exposure, and the Athlon deal has accelerated the transition. … Our risk assessment reflects ECA’s recent transformation to a more liquids-focused production profile, at a time when crude oil prices have retreated significantly from a cyclical high over most of the last decade.
RBC Capital Markets also chimed in later in the week on Encana. The rating is a mere Sector Perform, rather than Outperform, but RBC raised its price target to $8 from $7. Encana has a consensus analyst target of $7.77 and a 52-week range of $3.00 to $14.73.
After posting a loss, Superior Energy Services Inc. (NYSE: SPN) had many analyst calls this past week. Despite the many analyst target cuts, the ratings that we saw were mostly maintained positive. Superior’s earnings report indicated that its long-term strategy of disciplined geographic expansion remains unchanged, and it has to emphasize near-term priorities of cost reduction and cash preservation as it sees prolonged industry weakness. The company itself said:
Our efforts along these lines include identifying further opportunities internally for restructuring and reducing our 2016 capital plans significantly from 2015 levels. We expect 2016 capital expenditures to be within operating cash flows and concentrated on maintenance related activities.
These other analyst calls on Superior were seen as well:
- Credit Suisse has an Outperform rating but lowered its target to $12 from $17.
- Deutsche Bank has a Buy rating but lowered its price target from $19 to $15.
- Evercore ISI has a Buy rating but lowered its price target to $12 from $17.
- JPMorgan has an Overweight rating but lowered its target price to $13 from $16.
- Raymond James has a Strong Buy rating but lowered its price target to $11.50 from $13.
If you want a balancing call, S&P Capital IQ maintained its Sell rating and lowered its target to $8 from $13 last week.
Superior Energy hit a 52-week low of $8.25 (versus a 52-week high of $26.95), but its stock rose almost 8% to $9.74 on Friday. That actually allowed Superior Energy’s shares to post a 6.7% gain for the week.