Range Resources, IBD Stock Of The Day, Sets Up For Long Natural Gas Boom

Range Resources

Range Resources

RRC

$0.16


0.52%


28%

IBD Stock Analysis

• Natural gas producer pulls back for first time since breakout to 50-day/10-week
• Relative strength line right at highs

Composite Rating

Industry Group Ranking

Emerging Pattern

Pullback

* Not real-time data. All data shown was captured at
3:34PM EDT on
05/06/2022.

Range Resources (RRC) is Friday’s IBD Stock Of The Day as the natural gas producer with an enviable set of assets in the Appalachian Basin capitalizes on today’s surging prices while setting up for the long-haul. RRC stock is taking a breather near key support after marching to a five-year high last month, but it’s worth keeping a close eye on.

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This week’s pullback in natural gas prices gained steam on Friday, but that’s only after racing close to $9 per million Btu from under $4 at the start of the year. The takeoff came with Russia’s invasion of Ukraine, which turned Europe’s natural-gas dependence on Russia from an economic headache into a strategic disaster.

Natural Gas Prices

Unlike most commodity markets that are global in nature, natural gas prices are regional, because supply doesn’t flow as freely. The U.S. has been a low-price haven, which is great for manufacturers and consumers alike. However, the pull of more U.S. exports of liquified natural gas to help wean Europe off Russian gas has helped open the door to higher prices in the U.S.

Meanwhile, unseasonably warm spring weather in the U.S. also has helped to pump up demand and prices.

Range Resources earnings surged 293% in the first quarter, with analysts expecting EPS to soar 135% for the full year.

Yet amid surging prices in the U.S., natural gas producers seem to be mostly holding the line on output. With its April 26 Q1 earnings report, Range Resources stuck by its plan for “holding production approximately flat at 2.12-2.16 billion cubic feet equivalent per day” in 2022.

Instead of boosting capital spending, Range Resources is using its extra cash to pay down debt and buy stock. It now expects to hit its long-term debt-reduction target early in 2023.

Range Resources CEO Jeff Ventura told analysts that share buybacks are still a compelling value based on the company’s “massive inventory of high-quality wells in the Marcellus measured in decades” along with low capital requirements.

Piper Sandler analyst Mark Lear assumed coverage of RRC stock on April 21, giving it a 49 price target and calling it his favorite idea levered to natural gas prices.

RRC Stock

Despite soaring natural gas prices this year in recent months, RRC stock isn’t as extended as one might expect. In early March, RRC stock broke above a 26.58 buy point from an 18-week cup base dating back to late October.

After plowing ahead to 34.61 on April 18, RRC stock has pulled back to its 50-day moving average, dipped 0.5% to 30.54 on Friday. It now sits 16% above that prior buy point.

The down-sloping trendline from RRC stock’s April 18 high to its intraday high of 32.59 this week offers aggressive traders a new entry point, if RRC can clear that line. More simply, a rise to 32.69, just above Thursday’s high, would be actionable.

RRC stock’s tight trading range recently and its low-volume pullback from highs should lend some confidence.

However, keep in mind that the market has been volatile and that the uncertain economic outlook does pose some risk to natural gas prices and demand.

Be sure to read The Big Picture every day to stay in sync with the market direction and what it means for your trading decisions.

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