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Cenovus (CVE) Up 5.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
Home Depot (HD) closed at $204.74 in the latest trading session, marking a -0.37% move from the prior day.

A month has gone by since the last earnings report for Cenovus Energy (CVE). Shares have added about 5.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cenovus due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Cenovus Energy Loss in Q4 Wider Than Expected, Sales Miss

Cenovus Energy Inc. reported fourth-quarter 2018 loss per share of $1.03, against the Zacks Consensus Estimate of earnings of 16 cents. In the prior-year quarter, the company had incurred a loss of 35 cents per share. Higher transportation and blending expenses have hurt the bottom line.

Meanwhile, quarterly revenues of $3,439 million missed the Zacks Consensus Estimate of $3,778 million and fell from the year-ago quarter’s figure of $3,999 million.
 
Operational Performance

Quarterly revenues in the oil sands unit declined to C$1,419 million from C$2,311 million in the fourth quarter of 2017, courtesy of lower production of oil sands. The company recorded daily oil sand production of 326,481 barrels in the October-to-December quarter of 2018, down 9.7% year over year.

However, operating margin in the segment was a negative C$178 million, against positive C$612 million in the year-ago quarter.

Revenues in the Deep Basin unit fell to C$180 million from C$211 million in the year-ago quarter. Moreover, the segment’s operating margin came in at C$62 million, down from C$92 million in the year-ago quarter.

The divestiture of the Cenovus Pipestone Partnership marred the upside in production. Nevertheless, production from new wells primarily supported the business.

In the Refining and Marketing segment, the company generated revenues worth C$3,048 up from C$2,690 million in the year-ago quarter. The unit’s operating margin fell from C$314 million to C$251 million.

Improved refined product prices along with year-over-year higher crack spreads drove results.

Expenses

Transportation and blending expenses in the reported quarter rose to C$1,269 million from C$1,214 million in the year-ago quarter.

Balance Sheet & Capital Expenditures

As of Dec 31, 2018, the Canadian energy player had cash and cash equivalents of C$781 million and total long-term debt of C$8,482 million. The total debt-to-capitalization ratio was approximately 32%. The company incurred capital expenditure of C$291 million in the quarter under review.

Dividend

Cenovus Energy paid C$245 million to shareholders as dividend in 2018, higher than C$225 million a year ago.

Outlook

Through 2019, the company expects total oil equivalent daily production between 472 MBOE/D and 500 MBOE/D. In 2019, the company is planning to spend between C$1,200 million and C$1,400 million. Of this, about C$735-C$855 million will be allocated toward the Foster Creek and Christina Lake oil sands operations.

For refining operations, the company is likely to invest between C$240 million and C$275 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -38.71% due to these changes.

VGM Scores

At this time, Cenovus has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Cenovus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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