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Eni's (E) Capital Update Unveils $1.2B Buyback, Dividend Hike

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Eni SpA (E - Free Report) unveiled a comprehensive capital market update, outlining its strategic plans for the period 2024-2027, on Thursday. Let's delve into the details of Eni's ambitious initiatives.

Shareholder Rewards and Distribution Policy

Eni intends to initiate a share buyback program amounting to approximately euro 1.1 billion (approximately $1.2 billion) and increase its dividend to euro 1 per share for the current fiscal year. This move accompanies an expansion of its shareholder distribution policy to 30-35% of cash flow from operations.

Capital Allocation and Emission Reduction Targets

E expects a robust cash flow from operations before working capital of approximately euro 13.5 billion in 2024 and a staggering euro 62 billion throughout the outlined plan period. This projection represents a notable 30% improvement under a constant scenario.

The company aims to limit its net capital spending to euro 27 billion over the 2024-2027 period, translating to an annual average of euro 7 billion. This figure is notably lower than euro 37 billion allocated for the 2023-2026 plan, as presented last year. Eni remains committed to achieving net zero Scope 1, 2 emissions by 2035 and reducing Scope 1, 2 and 3 emissions by 35% within 2030.

Performance Outlook and Strategic Shifts

Eni intends to pursue strategic growth opportunities in various sectors, including gas and LNG, renewable energy, and carbon capture and storage (CCS). The company anticipates an EBIT of euro 800 million for its gas and LNG division in 2024, reflecting adjusted expectations in response to evolving natural gas prices.

Additionally, the company pledges to expedite its satellite strategy, wherein energy transition ventures will expand autonomously. Eni aims to achieve corporate cost savings of euro 1.8 billion during the 2024-2027 plan period. The company aims to increase its upstream production by an underlying 3-4% compound annual growth rate through 2027.

Investors' Response

Despite Eni's ambitious agenda, market sentiment appears tepid. Kim Fustier, HSBC's head of European oil and gas research, expressed investors' disappointment. The projected operative cash flow target of euro 13.5 billion fell short of expectations. Furthermore, the planned euro 1.1 billion stock buyback for the current year was deemed insufficient compared with euro 2.2 billion executed in 2023.

However, Eni remains optimistic about its long-term prospects, driven by its strategic evolution and commitment to sustainability. While the company's initiatives may face initial skepticism, the long-term impact is yet to be seen.

Zacks Rank & Key Picks

E currently has a Zack Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Sunoco LP (SUN - Free Report) , Murphy USA Inc. (MUSA - Free Report) and Energy Transfer LP (ET - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

Sunoco is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. By distributing more than 10 fuel brands via 10,000 convenience stores under long-term distribution contracts, the partnership will continue to generate stable cash flow.

The Zacks Consensus Estimate for SUN's 2024 EPS is pegged at $4.89. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States.

The Zacks Consensus Estimate for MUSA's 2024 EPS is pegged at $25.58. The company has a Zacks Style Score of B for Growth and B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Energy Transfer is a publicly traded limited partnership, focused on diverse energy assets in the United States. The company's core operations involve natural gas midstream services, transportation, storage, crude oil facilities and marketing assets.

The Zacks Consensus Estimate for ET's 2024 EPS is pegged at $1.44. The company has witnessed upward earnings estimate revisions for 2024 in the past 30 days. ET's 2024 earnings are expected to rise 32.1% year over year.

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