Aris Water Solutions: Strong Q1 Performance and Dividend Increase Justify Buy Rating and Raised Price Target

In a report released today, John Mackay from Goldman Sachs reiterated a Buy rating on Aris Water Solutions (ARIS – Research Report), with a price target of $18.00.

John Mackay has given his Buy rating due to a combination of factors that point to a positive outlook for Aris Water Solutions. The firm has demonstrated strong first quarter results with significant improvements in operating margins, indicating a recovery from previous lows. The robust performance aligns with the promises made by the company’s management, signaling effective execution of their strategies. Additionally, the announced dividend increase of approximately 17% suggests management’s confidence in the sustainability of these margin improvements and the emerging free cash flow profile.
Moreover, the company’s outlook is further bolstered by the potential for increased activity in the Permian region during the second half of the year, which is expected to align with the plans of producer customers. There is also anticipation for potential revenue from mineral extraction in 2025. Mackay acknowledges the company’s stronger balance sheet and hints that while mergers and acquisitions are now more likely, he expects the company to maintain its discipline regarding spending and return targets. These factors, combined with a revised EBITDA estimate and an improved target multiple, have led Mackay to increase the price target for Aris Water Solutions from $16 to $18.

In another report released yesterday, J.P. Morgan also maintained a Buy rating on the stock with a $17.50 price target.

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Aris Water Solutions (ARIS) Company Description:

Aris Water Solutions Inc is an environmental infrastructure and solutions company that helps customers reduce their water and carbon footprints. It has two primary revenue streams. The Produced Water Handling business gathers, transports, and, unless recycled, handles produced water generated from oil and natural gas production. The Water Solutions business develops and operates recycling facilities to treat, store and recycle produced water.