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National Fuel Gas (NFG) Down 0.3% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for National Fuel Gas (NFG). Shares have lost about 0.3% in that time frame, outperforming the S&P 500.

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

National Fuel Gas Q3 Earnings Top Estimates, Sales Lag

National Fuel Gas Company posted third-quarter fiscal 2019 operating earnings of 71 per share, beating the Zacks Consensus Estimate of 63 cents by nearly 12.7% but declining 2.7% from the year-ago figure of 73 cents.

Total Revenues

Total revenues of $357.2 million missed the Zacks Consensus Estimate of $398 million by 10.3%. However, the top line increased 4.2% from the prior-year figure of $342.9 million.

The year-over-year improvement was primarily due to strong contribution from Exploration and Production, and Other segments. However, lower contribution from Utility, Energy Marketing and Pipeline, and Storage and Gathering segments marginally offset the positives.

Highlights of the Release

Total operating costs in the reported quarter increased 6.8% from the year-ago period to $244.4 million, owing to rise in operating and maintenance expenses, along with higher taxes.

Total gas production in the reported quarter was 51,260 million cubic feet (MMcf), up from the year-ago figure of 40,970 MMcf, primarily due to higher production from the Appalachia region. Oil production was 576,000 barrels, down 4.2% from the year-ago level due to lower production from the West Coast region.

Operating income in the reported quarter was down nearly 1% year over year to $112.9 million.

The company incurred interest expenses of $26.5 million, down 5.7% from the year-ago period.

Financial Highlights

On Jun 30, 2019, National Fuel Gas had cash and cash equivalents of $87.5 million compared with $229.6 million as of Sep 30, 2018.

Long-term debt (excluding current maturities) was $2,133.1 million as of Jun 30, 2019 compared with the Sep 30, 2018 level of $2,131.4 million.

The company’s cash flow from operating activities in the first nine months of fiscal 2019 was $570.6 million, up from $518.1 million recorded in the comparable prior-year period.

Total capital expenditure in the first nine months of fiscal 2019 was $587.4 million, higher than $403.9 million in the comparable year-ago period.

Guidance

National Fuel Gas downwardly revised its fiscal 2019 earnings guidance to the range of $3.40- $3.50 from earlier expectation of $3.45-$3.65. The company expects fiscal 2020 earnings in the range of $3.25-$3.55 per share.

It reiterated the Exploration and Production segment’s fiscal 2019 net production guidance in the range of 205-215 billion cubic feet equivalent (Bcfe). For Fiscal 2020, production is expected in the range of 235-245 Bcfe.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, National Fuel Gas has an average Growth Score of C, however its Momentum Score is doing a lot 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, National Fuel Gas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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