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What's in the Cards for Diamondback (FANG) in Q1 Earnings?

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·5 min read
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Diamondback Energy, Inc. FANG is set to release first-quarter 2021 results on Monday May 3, after the closing bell.

The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at $1.81 per share and the same for revenues stands at $962.13 million.

Against this backdrop, let’s consider the factors that are likely to impact the company’s March-quarter results.

Factors Likely to Impact Q1 Results

The twin acquisitions of Energen Corporation and Ajax Resources in 2018 transformed Diamondback into one of the leading Permian Basin oil producers, driving significant production growth for the company, a trend that most likely continued in the first quarter as well.

Recently, the company’s preliminary first-quarter 2021 production of oil and natural gas averaged at 307,400 barrels of oil equivalent per day (Boe/d), surpassing the Zacks Consensus Estimate of 302,584 Boe/d and also increasing from the sequential quarter’s reported figure of 298,978 Boe/d. Notably, Diamondback’s average daily production of oil was 184,200 barrels per day (bpd), beating the Zacks Consensus Estimate of180,000 bpd and also improving from the previous quarter’s reported figure of 176,000 bpd.

Also, this Permian pure play’s top line is likely to have benefited with the average realized unhedged crude oil price being $56.94 in the first quarter, indicating an increase from the sequential quarter's reported figure of $38.64. The preliminary result for natural gas liquids was $22.94 while that of natural gas was $3.05 per thousand cubic feet, both implying an improvement from the sequential quarter’s reported figures of $14.68 and $2.64 per thousand cubic feet, respectively.

However, the company’s first-quarter cash capital expenditure outlook is projected in the $280-$300 million range, suggesting growth from the prior-quarter’s reported figure of $226 million.

Hence, the quarterly increase in output and average price realization of crude oil are likely to boost Diamondback’s first-quarter results whereas a projected rise in the sequential capital spending might hamper the overall results.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Diamondback this time around. 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 as elaborated below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Diamondback has an Earnings ESP of -5.41%.

Zacks Rank: Diamondback currently sports a Zacks Rank of 1, which increases the predictive power of ESP.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q4 Earnings & Surprise History

Diamondback delivered strong fourth-quarter 2020 earnings. Better-than-expected production led to this outperformance. Precisely, overall volumes were 299 thousand barrels of oil equivalent per day (MBOE/d), beating the Zacks Consensus Estimate of 291 MBOE/d.

The company’s adjusted net income per share of 82 cents outpaced the Zacks Consensus Estimate of 80 cents. However, the bottom line plunged 57.5% from the year-ago figure of $1.93 due to weaker average oil price realization.

This Permian pure play’s total revenues of $769 million outperformed the Zacks Consensus Estimate of $765 million but fell 30.3% from the year-earlier figure of $1,104 million.

As far as the earnings surprise track is concerned, this Midland, TX-based company shows a solid record with its bottom line having surpassed the Zacks Consensus Estimate in all the trailing four quarterly reports, the average being 119.98%. This is depicted in the graph below:

Diamondback Energy, Inc. Price and EPS Surprise

Diamondback Energy, Inc. Price and EPS Surprise
Diamondback Energy, Inc. Price and EPS Surprise

Diamondback Energy, Inc. price-eps-surprise | Diamondback Energy, Inc. Quote

Stocks to Consider

While earnings outperformance looks uncertain for Diamondback, here are some firms worth considering from the energy space on the basis of our model, which shows that these have the perfect combination of ingredients to deliver a positive surprise this reporting cycle:

Chevron Corporation CVX has an Earnings ESP of +3.32% and a Zacks Rank #3, currently. The firm is scheduled to release earnings on Apr 30.

Marathon Petroleum Corporation MPC has an Earnings ESP of +2.45% and a Zacks Rank of 3, currently. The firm is scheduled to release earnings on May 4.

NuStar Energy L.P. NS has an Earnings ESP of +78.08% and is Zacks #3 Ranked, presently. The firm is scheduled to release earnings on May 4.

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