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EOG Resources (EOG) Up 39.4% QTD: What's Behind the Rally?

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Zacks Equity Research
·3 min read
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EOG Resources, Inc.’s EOG shares have jumped 39.4% quarter to date (QTD) compared with the energy sector’s 30.5% rally. The Zacks Rank #3 (Hold) stock, with a market cap of $30.2 billion, witnessed an upward revision in the Zacks Consensus Estimate for 2021 earnings over the past 30 days.

Let’s delve into the factors that are responsible for the stock’s price appreciation.

What’s Favoring the Stock?

Although the price of West Texas Intermediate crude — currently hovering around $47 per barrel — is significantly below the price of more than $60 at the beginning of 2020, the commodity price has improved considerably in the past few months. The momentum is likely to continue, courtesy of the rolling out of coronavirus vaccine. Most of the analysts opine that by early next year, millions of Americans will get inoculated, which in turn will help the economy to rebound strongly within the first half of next year.

With countries banning passenger air travel from the U.K. to combat the rapidly spreading coronavirus strain, oil price is making a little retreat. However, its impact is not going to be profound and in fact, short lived. Overall, massive developments on the vaccine front will likely help fuel demand to recover in 2021.

Hence, oil explorers and producers are well placed to capitalize on fuel demand recovery. Thus, EOG Resources, having a strong footprint in prolific shale plays like Permian Basin and Eagle Ford, is well poised to gain.

Moreover, the upstream energy player has a strong balance sheet, on which it could rely on to sail through the coronavirus pandemic. Notably, the balance sheet has significantly lower debt levels compared with the composite stocks belonging to the industry. Importantly, with a cash balance of $3.1 billion and an undrawn credit facility of $2 billion, the company is well positioned to pay off near-term debt maturities.

Stocks to Consider

Some better-ranked players in the energy space include Summit Midstream Partners, LP SMLP, DCP Midstream, LP DCP and HighPoint Resources Corporation HPR. While Summit Midstream carries a Zacks Rank #2 (Buy), DCP Midstream and HighPoint sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Summit Midstream has seen upward earnings estimate revisions for 2020 in the past seven days.

DCP Midstream has seen upward estimate revisions for 2020 earnings in the past 30 days.

HighPoint is likely to see earnings growth of 167.5% in 2020.

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EOG Resources, Inc. (EOG) : Free Stock Analysis Report
Summit Midstream Partners, LP (SMLP) : Free Stock Analysis Report
DCP Midstream Partners, LP (DCP) : Free Stock Analysis Report
HIGHPOINT RESOURCES CORP (HPR) : Free Stock Analysis Report
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Zacks Investment Research