Is CRC Stock Worth Buying Despite Its Premium Valuation?

California Resources Corporation CRC is cutting costs faster than planned, improving well productivity and lowering the capital needed to sustain its California production base. Those gains strengthen the operating case after the Berry merger.

The offset is a forward earnings valuation above key industry benchmarks while 2026 earnings estimates are moving lower. Investors weighing CRC must decide whether better execution can offset commodity sensitivity, market-access constraints and a demanding multiple.

CRC's Cost Cuts Strengthen the Bull Case

By the second quarter of 2026, CRC had implemented more than 100% of its 2026 Berry synergy target, representing about $103 million of annualized savings six months ahead of schedule. General and administrative expenses also fell nearly 9% from the first quarter.

Management now targets up to $470 million of cumulative synergies and structural cost reductions through 2028. APA Corporation APA is pursuing a similar industry theme, raising expected 2026 exit run-rate cost savings to $500 million while maintaining U.S. capital at $1.3 billion and lifting U.S. oil production guidance.

Image Source: California Resources Corporation

CRC's Well Performance Lowers Maintenance Needs

Roughly 80% of CRC's year-to-date wells outperformed type curves, with average initial production more than 10% above expectations. California drilling time-to-market also improved about 25%, supporting more activity with fewer rigs.

CRC lowered its long-term California drilling, completion and workover maintenance capital estimate about 5% to $450-$475 million with six rigs. Matador Resources Company MTDR also raised full-year 2026 production guidance while expecting costs of $785-$805 per completed lateral foot, keeping capital efficiency central to the oil and gas investment case.

CRC's Valuation Leaves Less Room for Error

CRC trades at 15.55 times forward 12-month earnings, above 10.81 times for the Zacks sub-industry and 12.30 times for the Zacks Oils-Energy sector. Its five-year median multiple is 9.33 times.

Image Source: Zacks Investment Research

That premium does not erase the benefits of lower costs, but it raises the execution bar. Sustained savings, improved realizations and continued production efficiency become more important when investors are paying well above CRC's own historical median.

CRC's Earnings Estimates Point to More Caution

The Zacks Consensus Estimate for 2026 earnings is $3.53 per share, down from $4.11 in 2025. The full-year estimate has fallen 12.2% over the past four weeks, signaling weaker near-term earnings expectations despite the operating improvements.

Transportation bottlenecks remain another pressure point. Pipeline constraints contributed to lower realizations, higher transportation costs and a 137,000-barrel inventory build in the second quarter, while CRC still expects $520-$560 million of total capital investment in 2026.

CRC's Strong Style Scores Clash With a Sell Signal

Bottom line, CRC's efficiency gains improve the economics of sustaining production, but they do not remove the valuation premium or the decline in earnings estimates. The investment setup therefore remains mixed rather than clearly favorable.

CRC currently carries a Zacks Rank #4 (Sell). It also has a VGM Score of A, Growth Score of A and Value Score of B, while its Momentum Score of D is weaker. Zacks Style Scores complement the Zacks Rank rather than override it, so the current combination supports a cautious near-term view despite favorable growth and value characteristics.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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