Diamondback's (FANG) Q4 Earnings Preview: Things to Consider
Diamondback Energy FANG is set to release fourth-quarter results on Feb 20. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $4.60 per share on revenues of $2.2 billion.
Let’s delve into the factors that might have influenced the Permian-focused oil and gas producer’s performance in the December quarter. But it’s worth taking a look at FANG’s previous-quarter performance first.
Highlights of Q3 Earnings & Surprise History
In the last reported quarter, this Midland, TX-based upstream player beat the consensus mark on strong production and lower costs. Diamondback had reported adjusted earnings per share of $5.49 in the third quarter, beating the Zacks Consensus Estimate of $4.90. Revenues of $2.3 billion also breezed past the Zacks Consensus Estimate by 7.5%.
FANG beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two, resulting in an earnings surprise of 0.4%, on average. This is depicted in the graph below:
Diamondback Energy, Inc. Price and EPS Surprise
Diamondback Energy, Inc. price-eps-surprise | Diamondback Energy, Inc. Quote
Trend in Estimate Revision
The Zacks Consensus Estimate for the fourth-quarter bottom line has been revised 2.5% downward in the past seven days. The estimated figure indicates a 13% fall year over year. Meanwhile, the Zacks Consensus Estimate for revenues suggests a 6.9% increase from the year-ago period.
Factors to Consider
Diamondback Energy is expected to have benefited from higher production during the fourth quarter. The company continues to churn out impressive volumes from its wide inventory of drill-ready locations in the Permian Basin — America's hottest and lowest-cost shale region. Consequently, our expectation for FANG’s average fourth-quarter volume is pegged at 459,267.1 barrels of oil equivalent per day (BOE/d), up 17.3% from the year-ago quarter’s level of 391,402 BOE/d.
However, on a bearish note, the increase in Diamondback Energy’s costs might have pulled down its to-be-reported bottom line. Our estimate for lease operating cost per barrel of oil equivalent (BOE) is pegged at $5.94, indicating a rise from $4.47 reported in the year-ago quarter. Our model also predicts the company’s total cash operating expenses to go up 17.4% year over year to $11.93 per BOE.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Diamondback Energy is likely to beat estimates in the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is +0.18%.
Zacks Rank: Diamondback Energy currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
While an earnings beat looks uncertain for FANG, here are some firms from the energy space that you may want to consider on the basis of our model:
Cheniere Energy LNG has an Earnings ESP of +5.55% and a Zacks Rank #3. The firm is scheduled to release earnings on Feb 22.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Cheniere Energy beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of 92%, on average. Valued at around $37.5 billion, LNG has gained 4.6% in a year.
Suncor Energy SU has an Earnings ESP of +0.64% and a Zacks Rank #3. The firm is scheduled to release earnings on Feb 21.
Suncor Energy beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of 15.7%, on average. Valued at around $40.8 billion, SU has lost 7.1% in a year.
APA Corporation APA has an Earnings ESP of +0.34% and a Zacks Rank #3. The firm is scheduled to release earnings on Feb 21.
The 2024 Zacks Consensus Estimate for APA indicates 8% year-over-year earnings per share growth. Valued at around $9.1 billion, APA has lost 25.8% in a year.
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