Although Murphy Oil Corporation (NYSE: MUR) offers above-average dividend yield and has a strong balance sheet and the ability to generate healthy free cash flows, its stock trades at a discount to peers, according to KeyBanc Capital Markets.
KeyBanc’s Leo Mariani initiated coverage of Murphy Oil with an Overweight rating and a price target of $24.
Murphy Oil gives investors exposure to a large offshore-focused asset base and decently sized onshore acreage in Canada, with high oil cut and its oil commanding premium pricing, Mariani said in the initiation note.
Although this asset base is “currently out of favor with investors,” Murphy Oil would be a defensive play if commodity markets weaken, the analyst mentioned, citing the stock’s low valuation and the company’s solid balance sheet.
He added that, at 5.2%, Murphy Oil offers a dividend yield that is significantly higher than the industry average.
Although there are concerns around the company’s long-term production prospects, there are “significant exploration potential that would increase inventory if success were achieved in Mexico or Brazil,” Mariani wrote.
Moreover, the company has solid liquidity, with $1.6 billion in undrawn revolver capacity and $900 million in cash.
Shares of Murphy Oil were up 4.39% to $20.22 at the time of publishing.
Stocks That Hit 52-Week Lows On Thursday
Murphy Oil's Q2 Earnings Preview
Latest Ratings for MUR
|Sep 2019||Initiates Coverage On||Overweight|
|Sep 2019||Maintains||Market Perform|
View More Analyst Ratings for MUR
View the Latest Analyst Ratings
See more from Benzinga
- Bank Of America Upgrades Energizer, Says Hurdles Remain But Seem More Manageable
- BMO Sees Limited Near-Term Upside For Steel Dynamics
- BMO Upgrades Arch Coal On These Positive Catalysts
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.