KeyBanc has kept its Overweight recommendation on SM Energy (NYSE:SM) and left its price target at $28.00. The broker notes that the stock is trading at an attractive valuation relative to peers, even after a steep decline over the past year.
Market data show SM Energy’s share price at $21.46, translating into a price-to-earnings ratio of 3.37, while the stock has fallen roughly 42% over the last 12 months. Against that backdrop, KeyBanc trimmed its forecasts for capital expenditures, production, and earnings for the company.
The analyst cuts follow indications from SM Energy of reduced activity levels slated for 2026. KeyBanc noted those lower activity expectations but has not directly discussed the revised operational plans with company management.
In updating its model, KeyBanc reviewed rig counts and total in-line forecasts as well as recent well performance data. The firm also believes the company is marketing a South Texas asset that it values at in excess of $1 billion.
Although KeyBanc lowered its free cash flow and EBITDA projections, SM Energy nevertheless remains the least expensive name in the broker’s coverage universe on an intrinsic-valuation basis. The firm continues to expect organic deleveraging to progress, forecasting net leverage of 0.8 times by the end of 2026 on an organic basis - a view that excludes proceeds from any asset sales.
KeyBanc said it remains constructive on SM Energy as the company approaches its next quarterly earnings release.
Recent corporate and credit developments
Following SM Energy’s integration with Civitas Resources, two major credit-rating agencies revised the company’s ratings. S&P Global Ratings raised SM Energy to a 'BB' rating, citing an increase in company size and geographic diversity. Fitch Ratings upgraded the firm’s Long-Term Issuer Default Rating to 'BB+', attributing the move to larger production scale and greater reserve volumes.
On the financing front, SM Energy secured $2.5 billion in lender commitments as part of an amendment to its credit facility. That amendment raises the company’s borrowing base to $5.0 billion, extends the facility’s maturity to January 30, 2031, and expands the banking group supporting the company to 18 institutions.
In an audit transition, SM Energy has appointed Deloitte & Touche LLP as its auditor for the fiscal year ending December 31, 2026. Deloitte will replace Ernst & Young LLP following EY’s completion of the audit for the year ended December 31, 2025. The company reported no disagreements with EY during the prior fiscal years.
Taken together, the rating changes, amended credit facility and auditor transition reflect meaningful alterations to SM Energy’s financial and operational profile.
Summary and context
KeyBanc’s continued Overweight stance rests on a combination of an unusually low P/E multiple, expectations of organic deleveraging to 0.8 times by year-end 2026, and the presence of a marketed South Texas asset valued above $1 billion. At the same time, the broker has reduced near-term capex, production and earnings estimates in recognition of lower activity guidance for 2026. Credit upgrades and an expanded borrowing base add context to the firm’s view but do not alter the lowered cash-flow and EBITDA outlooks that KeyBanc now models.