Noble Energy, Inc. (NBL) — This large independent exploration and production company has one of the best management teams in the oil and gas industry. They have responded to falling oil prices by reducing their capital spending program and cutting their quarterly dividend, most recently by 44 cents to 10 cents per share.
On Feb. 17, Noble reported a 21% decline in Q4 revenues to $846 million, missing analysts’ estimates of $1.1 billion. But adjusted earnings per share of 44 cents came in well ahead of Zacks consensus estimate for a loss of 4 cents. Investors responded favorably, pushing NBL stock up 6% on the day.
Following the announcement, S&P Capital IQ Equity Research, which rates NBL stock a “Buy,” widened its expected loss for 2016 to $1.01 per share from a previous estimate for a loss of 71 cents, and said it expects a loss of 72 cents per share for 2017. Its analysts maintained their 12-month price target of $36, which is based on a 6.7 multiple of this year’s projected operating cash flow.
On the same day, Credit Suisse raised its target on NBL stock to $40 from $38 and maintained its “Outperform” rating.
But keep in mind that these targets were established in mid-February when WTI oil was trading near 12-year lows at about $30 a barrel. On Thursday, oil prices hit $40 a barrel for the first time this year, rebounding more than 50% from their February lows. Higher oil prices could result in analysts raising their targets for NBL stock.
Turning to the chart, NBL stock recently broke out from a right triangle at its 50-day moving average, now at $30.16. Thursday’s high of $34.42 came close to breaking the 200-day moving average at $34.55.
Accumulation has been picking up recently, and the MACD indicator is on a strong buy signal.
Buy NBL stock at $34 with an initial trading target of $39 to $40, which would result in a gain of at least 15%. As I mentioned, higher oil prices could mean higher prices for NBL stock.