California Resources Corp. (CRC) is an oil and natural gas company involved in the exploration, production, and marketing of crude oil (CLV24), natural gas (NGV24), and natural gas liquids (NGLs). Additionally, it is also involved in the production and sale of electricity to the utility sector and wholesale power market, and has a joint venture with Brookfield geared toward carbon capture initiatives.
Based in Long Beach, California, the energy company is valued at $3.64 billion. CRC is a component of the small-cap benchmark Russell 2000 Index (RUT), as well as the S&P SmallCap 600 ($IQY).
CRC stock has underperformed the broader market in 2024, down 3.9% on a YTD basis. However, the shares have bounced to a gain of 21% since hitting a 52-week low of $43.09 in early August.
California Resources Reports Q2 Results
California Resources released its Q2 results on Aug. 6, with the adjusted profit of $42 million, or $0.60 per share, falling short of analysts' expectations. On the other hand, revenue of $514 million fell 13% year over year, but still surpassed Wall Street's expectations by a healthy margin.
During the quarter, CRC generated $97 million of net cash from operating activities, and $63 million of free cash flow.
CRC also closed its merger with Aera Energy during the quarter, which is expected to double cash flow. The energy company increased its targeted synergies from the deal to $235 million, including a reduction of $60 million in annual interest expense and $25 million in additional operational synergies.
Plus, California Resources hiked its dividend by 25%, bringing the quarterly payout to $0.3875 per share. That results in a yield of 2.91% at current levels. Year-to-date, CRC has returned 142% of its free cash flow to shareholders, including $43 million in dividends and $93 million in share repurchases.
California Resources Scores an Upgrade
Analysts already liked California Resources, but the energy stock now has a “Strong Buy” consensus rating, up from “Moderate Buy” one month ago. Currently, 7 analysts are covering CRC, with 5 “Strong Buy” ratings, 1 “Moderate Buy,” and 1 “Hold.”
On Aug. 21, Bank of America (BAC) analyst Kalei Akamine upgraded the energy stock from “Neutral” to “Buy,” while increasing the price target from $57 to $65. In a note to clients, the analyst cited CRC's close proximity to California's Central Valley, set to become an AI data center hub by 2028.
Noting that "the best option for clean dispatchable baseload power in California may be natural gas with carbon capture," the analyst added that "[carbon capture and storage] development is still conceptual, but data centers may be the commercial opportunity to push this forward."
CRC now has an average 12-month price target of $62.28, implying upside potential of 18.7% from Friday's close.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
