Traders ought to grasp SM Vitality forward of its earnings report, in accordance with TD Cowen. Analyst Gabe Daoud upgraded his ranking on the inventory to purchase from maintain. That stated, decrease commodity costs led him to chop his worth goal by $4 to $60. That also implies round 34.5% upside, as of Monday’s shut. “Whereas we’re cautious [on] crude we consider SM stands out as retaining a number of useful resource catalysts – at a time when that is largely nonexistent in [earnings and profits] – that may form a extra capital environment friendly ’25 [versus] what’s appreciated,” he stated in a observe to purchasers on Tuesday. “We see dividend protection right down to ~$49/bbl which might show defensive in a unstable tape.” Heading into its third-quarter outcomes on the finish of the month, Daoud expects the corporate to beat Wall Road’s expectations. He additionally sees “enticing” capital effectivity for 2025. As catalysts for development, the analyst cited SM’s acquisitions within the Klondike space in Texas – the place the corporate expects to finish eight wells this 12 months – and the Uinta Basin in Utah. “SM stays a technical chief within the Midland Basin with ’23 oil productiveness rating first amongst operators and ’24 not far behind,” Daoud stated. “General ’24 nicely productiveness continues to outperform ’23 throughout SM’s core property in Midland & South Texas, each of which sit on the low-end of the associated fee curve supporting sturdy [free cash flow] in a unstable pricing surroundings.” On high of that, he famous that return-of-capital initiatives, reminiscent of dividend will increase or share buybacks particularly, might drive extra upside. SM YTD mountain SM, year-to-date Whereas the inventory was down round 3% premarket on Tuesday, it has risen greater than 15% in 2024 and about 14% prior to now one month.