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EQT (EQT) Down 5.9% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
Constellation Brands (STZ) saw a big move last session, as its shares jumped more than 5% on the day, amid huge volumes.

It has been about a month since the last earnings report for EQT (EQT). Shares have lost about 5.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is EQT due for a breakout? 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 catalysts.

Second-Quarter 2018 Results

EQT Corporation recently reported second-quarter 2018 adjusted earnings of 44 cents per share, which beat the Zacks Consensus Estimate of 37 cents and also improved from the prior-year level of 6 cents.

Surging profit level from the EQM Gathering segment primarily attributed to the strong second quarter earnings, negated partially by lower natural gas equivalent price realizations.

Total operating revenues jumped 53.1% year over year to $1,054.7 million. However, the top line missed the Zacks Consensus Estimate of $1,103 million.

Production and Price Realization

Sales volume rose to 362,540 million cubic feet equivalent (MMcfe) of natural gas from the year-ago quarter’s 198,080 MMcfe. Average realized price of natural gas equivalents fell to $2.81 per thousand cubic feet from the year-ago period’s $2.86.

Segment Details

EQT Production reported second-quarter operating revenues of $950.6 million, up 50.6% year over year. The upside was mainly driven by higher sales volume of natural gas. Operating loss was $79.8 million against an income of $52.9 million in the year-ago quarter, due to increased operating costs (78.2% year over year) and lower average realized price of natural gas equivalent.

In the EQM Gathering segment, operating revenues increased 61.1% year over year to $180.6 million. Operating expenses rose to $59 million from $28.7 million in the year-ago period. Operating income jumped 46% year over year to $121.6 million in the quarter under review. The segment’s impressive results can be attributed to EQT’s Marcellus Shale’s output development.

In the EQM Transmission segment, operating revenues grew 5.2% year over year to $89.1 million. Operating expenses in the segment was recorded at $28.5 million, $1.7 million higher than the year-ago period. Operating income was up 4.7% year over year to $60.6 million in the reported quarter, due to rise in the existing deals’ contractual rates.

Following the acquisition of Rice Energy (Nov 13, 2017), RMP Gathering and RMP Water were included in EQT’s segments.

Operating income from RMP Gathering was recorded at $39.6 million in the quarter, while RMP Water generated an operating income of around $24 million.

Financials

The company’s adjusted operating cash flow was $526.1 million during the quarter, up 128.2% year over year. EQT’s capital expenditure totaled $960.6 million in the second quarter. This includes $47.4 million spent on RMP Gathering and $7 million on RMP Water.

Guidance

Production sales volume for the third quarter of 2018 is projected in the range of 370-380 billion cubic feet equivalent (Bcfe). For the second half of the year, production sales volume is expected in the range of 770-790 Bcfe.

Liquids volume is estimated at 2,580-2,700 thousand barrel of oil equivalent (MBBl) for the third quarter. For the second half of the year, liquids volume is expected in the range of 5,125-5,275 MBBl.

Adjusted operating cash flow for 2018 is expected in the range of $2,700-$2,800 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -15.67% due to these changes.

VGM Scores

At this time, EQT has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, EQT has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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