As investors seek reliable income stocks, a recently restructured energy company looks like a smart bet, according to Credit Suisse. Analyst William Janela kicked off coverage of Chesapeake Energy with an outperform rating, saying in a note to clients that the company is on much stronger footing after filing for bankruptcy and joining the public markets last year. “CHK emerged from the restructuring with a significantly stronger balance sheet and a weaker cost structure, which relieves it of the major issues that plagued the former company. With two subsequent acquisitions, CHK has moved firmly into natural gas, which should position it to deliver above-average revenues. cash returns to shareholders,” Janela wrote. Energy stocks outperformed in 2022, but fell sharply on Monday as recession fears prompted a sell-off on Wall Street. Chesapeake matches that pattern, adding 44.7% year-to-date but posting a 4.9% drop on Monday. Even with the year’s big gains, the stock looks undervalued based on the cash it generates, Credit Suisse said. “At current strip prices, we see CHK generating ~$5 billion in organic FCF and earning >$2.5 billion in total dividends in 2023, >20% cash yield. Share buybacks are added to its formula; we expect CHK to run the $1 billion. clearance by YE23, increasing his total cash return to >25%,” Janela wrote. The stock could also see a boost in the second half of this year if an activist investor successfully pressures Chesapeake to offload more oil assets, Janela wrote. Credit Suisse has set a price target of $115 per share for Chesapeake, about 23% above where the stock closed on Monday. – CNBC’s Michael Bloom contributed to this report.
