Coterra Energy EPS Set to Double in 2025: Should You Buy It?

Coterra Energy CTRA delivered a mixed yet promising fourth-quarter 2024 performance, beating earnings estimates but missing revenue projections. The U.S. oil and gas producer reported adjusted EPS of 47 cents, surpassing the Zacks Consensus Estimate of 41 cents, thanks to stronger-than-expected production volumes. However, revenues came in at $1.4 billion, missing expectations by $6 million and marking a 12.6% decline year over year. Despite this, the company increased its quarterly dividend by 5% to 22 cents per share, reinforcing its commitment to shareholder returns.Beyond the numbers, Coterra’s operational efficiencies, strong valuation metrics, and improving production profile make it an attractive investment. With EPS expected to grow by 97.6% year over year in 2025, Coterra presents a compelling case for investors seeking value and growth in the energy sector. Image Source: Zacks Investment ResearchStrong Production Growth and Capital DisciplineCoterra’s Q4 2024 production exceeded expectations, with total output reaching 681.5 thousand barrels of oil equivalent per day (Mboe/d) compared to the Zacks Consensus Estimate of 654 Mboe/d. Notably, oil production increased by 7.9% year over year to 113 thousand barrels per day, while natural gas liquids (NGL) production rose 7.8%. The company has set ambitious 2025 targets, forecasting total production between 710-770 Mboe/d, with oil output expected to range from 152-168 thousand barrels per day.This production growth is being achieved with capital spending between $2.1 billion and $2.4 billion, reflecting disciplined investment in high-return assets. The integration of recent Permian acquisitions, including Franklin Mountain and Avant, is expected to improve efficiency, supporting long-term production without significantly increasing costs.Attractive Valuation and Strong Market PerformanceCoterra looks appealing from a valuation standpoint, confirmed by its Zacks Value Score of B. Its EV/EBITDA ratio is competitive within the industry, while its forward P/E of 8.6X is at a discount to its subsector, offering a compelling value proposition. Image Source: Zacks Investment ResearchThe stock has also gained 12% over the past six months, outpacing not just the S&P 500’s 7% gain but also the broader Oil/Energy sector and competitors like Ovintiv OVV. Additionally, CTRA’s expected EPS growth rate of 15.5% over the next three to five years surpasses the industry average of 12.3%, indicating a strong earnings trajectory.CTRA, OVV 6 Month Stock Performance Image Source: Zacks Investment ResearchRobust Shareholder Returns and Deleveraging EffortsCoterra remains committed to returning capital to shareholders, having distributed 89% of its 2024 free cash flow through dividends and share repurchases. In the fourth quarter alone, 61% of free cash flow was allocated to investors.Alongside the 5% dividend increase, the company repurchased 2.1 million shares for $50 million during the quarter and 17.1 million shares for $451 million in 2024. Additionally, Coterra plans to repay $1 billion in debt in 2025, further strengthening its balance sheet while maintaining attractive shareholder returns. Image Source: Coterra EnergyPotential Risks to ConsiderWhile Coterra’s fundamentals remain strong, lower natural gas prices and rising operating costs could pressure margins. The company’s total operating expenses increased to $1.1 billion in Q4, up from $1 billion a year ago, due to higher depreciation and depletion costs. Additionally, capital expenditures for 2025 are expected to rise, which could limit free cash flow growth if commodity prices soften.Moreover, the natural gas market remains volatile, and any unexpected decline in demand could weigh on Coterra’s production-heavy strategy. Investors should keep an eye on commodity price trends and cost controls.Conclusion: Coterra Energy Is a “Buy”Despite some headwinds, Coterra Energy presents a compelling buy opportunity. With strong production growth, disciplined capital spending, an attractive valuation, and robust shareholder returns, the company remains well-positioned for long-term success.Its EPS is projected to double in 2025, far outpacing industry peers, while its solid balance sheet and strategic acquisitions reinforce its competitive edge. For investors looking for a mix of value, growth, and income in the energy sector, Coterra Energy is a Zacks Rank #2 (Buy) stock worth investing in at the current levels. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Coterra Energy Inc. (CTRA): Free Stock Analysis Report Ovintiv Inc. (OVV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks