Canadian Natural Resources cash flow beats expectations

We’ve raised our fair value estimates, stock is still in 3-star category

Joe Gemino 25 November, 2019 | 1:41PM

After a taking a fresh look at no-moat Canadian Natural Resources' (CNQ) third-quarter results, we are increasing our fair value estimate to $43 per share from $41. We are increasing our near-term cash flow outlook, driven by our increased forecast for near-term commodity prices coupled with our lower forecast for the company’s operating costs.

Despite the bump in our fair value estimate, the stock is still trading in 3-star territory with modest upside to our valuation. We think that the market is appropriately valuing the company’s ability to generate cash flow amid low Canadian commodity prices, but we caution investors that we don’t expect the stock price to fully appreciate toward our fair value estimate until there is more clarity surrounding pipeline expansions and expanded market access. The stock is yielding 4%, which represents the head of the class among oil sands peers.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canadian Natural Resources Ltd23.93 CAD3.82

About Author

Joe Gemino

Joe Gemino  Joe Gemino, CPA, is an equity analyst for Morningstar covering Canadian oil and Gas companies.

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