Nomura Securities Downgrades Range Resources (RRC) to Neutral

Nomura Securities downgraded Range Resources (NYSE: RRC) from Buy to Neutral with a price target of $45.00 on valuation.

Analyst Lloyd Byrne commented, "We are dropping our investment recommendation on RRC to Neutral from Buy based on valuation. Our Buy recommendation had been tied to the quality of the asset base, the strength of management and the ability of RRC to positively surprise on the capital efficiency side. We continue to believe in this, and have modelled this, as enhanced completions, longer laterals and targeting are optimized. We also see the potential for natural gas prices to be back above $3/Mcf in the fall, given limited storage, the time of year, and falling supply. We get it. However, valuation is now stretched, in our view, and RRC needs to digest the recent moves. The stock has recently outperformed the commodity and the peer group and looks expensive relative to historical multiples. In our recent note, we detailed our $45/sh price objective, which includes a return to $3/Mcf gas in '17, operational success at the Terryville field in the geo-pressured lower Cotton Valley, and continued efficiencies on RRC's core Marcellus asset. Our Henry Hub price deck assumes natgas is $3/Mcf in '17, $3.50 in '18, and $3.75 in '19. The current strip is approximately ~6% higher than the Nomura deck for the remainder of '16, on par with '17, and ~13% lower in '18. FY16E EPS at ($0.34); FY17E EPS at ($0.86)."

For an analyst ratings summary and ratings history on Range Resources click here. For more ratings news on Range Resources click here.

Shares of Range Resources closed at $46.22 yesterday.

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