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The energy company reported Wednesday fourth-quarter earnings of $507 million, or $1.25 a share, down from year-ago earnings of $562 million, or $1.29.
"Devon is moving back to a position where the investment case could evolve beyond simply a call on the commodity; while 4Q11 results impressed vs. expectations, guidance for the coming year points to growth in liquids that is evolving faster than prior expectations," Bank of America Merrill Lynch analysts wrote in a report Thursday. "Overall, Devon has increasingly shown the market a solid, reliable strategy - albeit one that typically evolves slower versus peers. However the share price reaction to what were arguably solid results and production guidance has perhaps embedded the most immediate upside potential in the stock so that versus a more tangible event horizons within our coverage universe, we continue to rate the stock Neutral."
Shares of Devon Energy were upgraded to
buy from hold by
"The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and growth in earnings per share,"
TheStreet Ratings wrote. "We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Devon Energy has an estimated price-to-earnings ratio for next year of 9.85; the average for exploration and production companies is 19.33. For comparison,
EOG Resources(EOG) both have higher forward P/Es of 18.39 and 17.54, respectively.
Of the 19 analysts who cover Devon Energy, 14 rated it a hold. Three analysts gave it a but rating and two rated it a sell.
TheStreet Ratings gives Devon Energy a B- grade with a
$82.81 price target. The stock closed Thursday at $75.02 and has risen 21% year to date.