Woodside Energy Group Ltd (ASX: WDS) shares are pushing higher on Tuesday.
In morning trade, the energy giant's shares are up 2% to $35.84.
This latest gain means the Woodside share price is now up 26% over the last 12 months.
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Where next for Woodside shares?
Unfortunately, one leading broker believes the Woodside share price has now climbed beyond fair value.
According to a note out of Morgans, in response to its full-year results, the broker has retained its hold rating and $33.60 price target.
This suggests that its shares could slide over 6% from current levels over the next 12 months.
The broker also warned that Woodside would be unlikely to pay such a large dividend again in FY 2023 and is forecasting a reduction from US$2.53 per share to 75 US cents per share.
What did the broker say?
Morgans notes that the Woodside's full-year earnings were ahead of its estimates but fell short of consensus expectations in FY 2022. It said:
WDS reported a softer than expected 2022 earnings and dividend result, relative to consensus expectations. Underlying EBITDA US$11,234m (vs MorgE US$10,990m vs consensus US$12,077m), +172% vs pcp. WDS declared a final dividend of USD 144 cps (-8% vs consensus), maintaining an 80% payout ratio of underlying NPAT.
Commenting on future dividends, the broker believes that cuts are coming due to higher capex. Though, it concedes that management could look to maintain them. It adds:
WDS declared impressive dividends for the 2022 year, driven by upsized earnings realised from the acquired BHP-P assets. On the result call, WDS confirmed that it would consider sacrificing its gearing target of 10-20% temporarily in order to maintain its dividend profile in high capex years. WDS' view is that the target gearing range is a through-the-cycle target so there would be periods when WDS trends above or below that range. We are forecasting dividends to reduce in the coming years as WDS go through a capital-intensive period from FY23-24.
Finally, although the broker is a fan of the company, it simply doesn't see enough value in the Woodside share price to recommend it as a buy. It concludes:
We have a positive view on WDS in terms of its fundamentals, balance sheet, and asset portfolio; although view its current share price as already reflecting fair value against our expected TSR. Maintain our Hold rating.
