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National Fuel Gas (NFG) Down 8.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for National Fuel Gas (NFG). Shares have lost about 8.4% in that time frame, underperforming 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 Q2 Earnings & Revenues Lag Estimates

National Fuel Gas Company posted second-quarter fiscal 2019 operating earnings of $1.07 per share, lagging the Zacks Consensus Estimate of $1.15 by nearly 7% and declining 3.6% from the year-ago figure of $1.11.

Total Revenues

Total revenues of $552.5 million missed the Zacks Consensus Estimate of $590 million by 6.4%. However, the top line increased 2.1% from the prior-year figure of $540.9 million.

Utility and Energy Marketing revenues improved 3.4% year over year to $357.7 million. On the contrary, revenues from Pipeline, Storage and Gathering, as well as Exploration and Production and Other dropped 9.7% and 0.9% from the prior-year quarter to $48.4 million and $146.5 million, respectively.

Highlights of the Release

Total operating costs in the reported quarter increased 8.1% from the year-ago period to $399.2 million, owing to a rise in operating and maintenance expenses, and purchased gas prices.

Total gas production in the reported quarter was 45,370 million cubic feet (MMcf), up from the year-ago quarter figure of 42,078 MMcf, primarily due to higher production from the Appalachia region. Oil production was 564,000 barrels, down 14.9% from the year-ago level due to lower production from the West Coast region.

Operating income in the reported quarter was down 10.6% year over year to $153.4 million.

The company incurred interest expenses of $25.3 million, up 7% from the year-ago period.

Financial Highlights

On Mar 31, 2019, National Fuel Gas had cash and cash equivalents of $100.6 million compared with $229.6 million as of Sep 30, 2018.

Long-term debt (excluding current maturities) was $2,132.5 million as of Mar 31, 2019 compared with the Sep 30, 2018 level of $2,131.4 million.

The company’s cash flow from operating activities in the first six months of fiscal 2019 was $340.8 million, up from $288.7 million recorded in the comparable prior-year period.

Total capital expenditure in the first six months of fiscal 2019 was $386.6 million, higher than $288.7 million in the comparable year-ago period.

Guidance

National Fuel Gas reiterated its fiscal 2019 earnings guidance in the range of $3.45-$3.65. The midpoint of the range is $3.55 per share, which is lower than the current Zacks Consensus Estimate of $3.66 for the period.

The company lowered Exploration and Production segment’s fiscal 2019 net production guidance to the range of 205-215 billion cubic feet equivalent (“Bcfe”) from prior expectation of 210-230 Bcfe, with the primary reason being drilling and completion delays.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, National Fuel Gas has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, National Fuel Gas has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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