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Is a Beat Likely for Viper Energy (VNOM) in Q4 Earnings?

Zacks Equity Research

Viper Energy Partners LP VNOM is set to report fourth-quarter 2019 results on Feb 11, after the closing bell.

In the last reported quarter, the partnership came up with earnings per unit of 13 cents, beating the Zacks Consensus Estimate of 6 cents and rising from the year-ago figure of 5 cents. The bottom-line performance was supported by higher production volumes and lower average operating expenses.

The partnership beat the Zacks Consensus Estimate once in the last four quarters, as shown in the chart below.

Viper Energy Partners LP Price and EPS Surprise

Viper Energy Partners LP Price and EPS Surprise

Viper Energy Partners LP price-eps-surprise | Viper Energy Partners LP Quote

Let’s see how things have shaped up prior to the announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter earnings of 9 cents has seen two upward and three downward revisions in the past 30 days. The figure suggests a year-over-year decline of 10%.

Further, the Zacks Consensus Estimate for revenues is pegged at $88.8 million for the quarter, indicating a rise of 20.5% from the year-ago reported figure.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Viper Energy this time around. This is because it has the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Viper Energy has an Earnings ESP of +20.74%. This is because the Most Accurate Estimate of 11 cents is pegged higher than the Zacks Consensus Estimate of 9 cents per unit.

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #3.

Factors Driving the Better-Than-Expected Earnings

Viper Energy generates strong and steady royalty income from mineral interests in the prolific U.S. basins. Its average daily production in fourth-quarter 2019 was 26.1 thousand barrels of oil equivalent per day (Mboe/d), significantly higher than the year-ago level of 20.2 MBoe/d. Crude oil constituted the majority of the partnership’s production. 

The Zacks Consensus Estimate for fourth-quarter crude production is pegged at 1,518 thousand barrels (MBbls), indicating an increase from 1,275 MBbls in the year-ago period. This is expected to have been supported by Diamondback Energy, Inc.’s FANG strong operations. The upside is also expected to have been aided by the five new wells in Spanish Trail, wherein Viper Energy holds a 25% royalty interest, that were turned to production in the quarter. The higher production will likely help the partnership to come up with encouraging results this time around.

The Zacks Consensus Estimate for average crude sales price is pegged at $53 per barrel, suggesting an increase from the year-ago quarter’s $48.73. The potential increase is expected to have boosted the partnership’s bottom line.

Other Stocks to Consider

Some other energy stocks with the perfect mix of elements to beat on earnings in the upcoming quarterly release are:

Cenovus Energy Inc. CVE has an Earnings ESP of +8.55% and a Zacks Rank #2. The company is set to release quarterly earnings on Feb 12. You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources Corporation AR has an Earnings ESP of +6.49% and a Zacks Rank #2. The company is set to release quarterly earnings on Feb 12.

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Cenovus Energy Inc (CVE) : Free Stock Analysis Report
 
Antero Resources Corporation (AR) : Free Stock Analysis Report
 
Viper Energy Partners LP (VNOM) : Free Stock Analysis Report
 
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
 
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