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Bear of the Day: Range Resources (RRC)

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Range Resources Corp. (RRC - Free Report) had a record 2022 as natural gas prices soared. But earnings are expected to decline for this Zacks Rank #5 (Strong Sell) in 2023 as natural gas prices fall.

Range Resources is an independent natural gas and NGL producer with operations focused in stacked-pay projects in the Appalachian Basin.

Another Beat in the Fourth Quarter 2022

On Feb 27, Range Resources reported its fourth quarter and full year 2022 results. It beat on the Zacks Consensus Estimate by $0.18 reporting $1.30 versus the consensus of $1.12

For the full year, Range Resources saw record cash from operations of $1.9 billion. Like many energy companies, it returned much of the free cash flow to shareholders in the form of $39 million in dividends, $400 million in share repurchases and $1.1 billion in debt reduction.

The key for the energy producers is the 2023 production and the capital guidance plan. It's all-in 2023 capital budget is expected to be $570 to $615 million planned to maintain production at 2.12 to 2.16 Bcfe per day.

Range's all-in maintenance capital is expected to be approximately $0.76 per mcfe, among the lowest of the US natural gas producers.

Range also increased hedge positions for 2023 and 2024 to approximately 55% and 35% of natural gas production with weighted-average floors of $3.57 and $3.75 per MMBtu, respectively.

"As we enter 2023, the progress made during the past year both financially and operationally puts Range in the strongest position in Company history," said Jeff Ventura, CEO.

Analysts Cut Full Year Earnings Estimates

Over the last 60 days, 9 estimates have been cut pushing the Zacks Consensus down to $3.21 from $4.89 during that time. That is an earnings decline of 37.2% from 2022 as the company made $5.11 in 2022.

But 2022 was also a record year.

Shares are up in 2023

Shares have been on a roller coaster over the last year. They're up just 3.1% during that time. But they have rallied in 2023, running up 11.6%.

Zacks Investment Research
Image Source: Zacks Investment Research

They're still cheap with a forward P/E of 8.7. And it has a PEG ratio of 0.3. A PEG ratio under 1.0 usually indicates a company has both growth and value.

Range Resources dividend is currently yielding 1.2%.

While Range Resources has a Strong Sell recommendation because of the earnings estimates cuts, it's still cheap. It might be one to keep on the short list for when the Rank changes.

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