| Morgan Stanley Says Encana Is 'Pulling The Trigger,' Upgrades To Overweight | |
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In a report published Tuesday, Morgan Stanley analyst Benny Wong upgraded shares of Encana Corporation (USA) (NYSE: ECA) to Overweight from Equal-weight with a price target raised to $18 from a previous $15 based on an improving asset base.
According to Wong, Encana's asset base continues to improve as it becomes increasingly liquids weighted – rising from 10 percent in 2013 to an estimated 40 percent in 2016. A greater focus on liquids brings improving productivity for the company while decreasing costs. In fact, Encana has the highest liquids growth among its U.S. peers with a 37 percent compounded annual growth rate through 2018.
"We see liquids growth start to outperform peers in the next 12 months with the potential of further non-core divestitures to deleverage," Wong wrote. "Both are key to the re-rating potential of Encana into a liquids weighted E&P."
Wong noted that the company's balance sheet is expected to improve from 3.4x 2015 net-debt-to-trail cash flow (versus 2.4x U.S. peers) to 2.6x (versus 2.8x peers) in 2016. The analyst also added that Encana's sale of non-core asset including the DJ Basin and San Juan ($1.4 billion to $1.6 billion) and Haynesville ($1 billion) could improve its net debt-to-trailing cash flow to approximately 2.0x.
Bottom line, Encana is an "improving story" that investors will ultimately recognize with a re-rating to a higher valuation and narrow the valuation gap with its U.S. peers over time. Moreover, the analyst's price target implies a total return of around 35 percent, the greatest in his Canadian Energy coverage.
Latest Ratings for ECA
Date | Firm | Action | From | To |
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Apr 2015 | Morgan Stanley | Upgrades | Equal-weight | Overweight | Apr 2015 | Bank of America | Upgrades | Neutral | Buy | Apr 2015 | Deutsche Bank | Maintains | | Hold |
View More Analyst Ratings for ECA
View the Latest Analyst Ratings
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Encana Corporation
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EXPLORATION STAGE |
CODE : ECA.TO |
ISIN : CA2925051047 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Encana is a oil and natural gas producing company based in Canada. Encana holds various exploration projects in Canada. Its main exploration property is BUFFALO HILLS in Canada. Encana is listed in Canada and in Germany. Its market capitalisation is CA$ 4.8 billions as of today (US$ 3.7 billions, € 3.3 billions). Its stock quote reached its highest recent level on November 23, 2018 at CA$ 9.99, and its lowest recent point on January 24, 2020 at CA$ 4.96. Encana has 973 120 000 shares outstanding. |