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Why Is Canadian Natural Resources (CNQ) Down 5.1% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Canadian Natural Resources (CNQ). Shares have lost about 5.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Canadian Natural Resources 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.

Canadian Resources Reports Q1 Earnings Beat

Canadian Natural recorded first-quarter adjusted earnings per share of 49 cents, beating the Zacks Consensus Estimate of 35 cents. The outperformance can be primarily attributed to higher commodity price realizations. However, the bottom line was lower than the prior-year earnings of 56 cents a share.

Total revenues came in at $3,947 million, surpassing the Zacks Consensus Estimate of $3,726 million. However, the top line recorded a decline from first-quarter 2018 revenues of $4,538 million.

Production & Prices

Canadian Natural reported quarterly production of 1,035,212 barrels of oil equivalent per day (BOE/d), down from 1,123,546 BOE/d in the prior-year quarter. Oil and natural gas liquids (NGLs) output (accounting for more than 76.1% of total volumes) decreased to 783,512 barrels per day (Bbl/d) from 854,558 Bbl/d recorded a year ago. Crude oil and NGLs production from operations in North America came in at 735,643 Bbl/d, lower than the year-ago quarter’s 813,536 Bbl/d due to production cuts mandated by the government of Alberta.

Natural gas volumes recorded a year-over-year decline from 1,614 million cubic feet per day (MMcf/d) to 1,510 MMcf/d in the quarter under review. Production in North America came in at 1,454MMcf/d, lower than the year-ago period’s 1,547MMcf/d.

Canadian Natural’s realized natural gas price was C$3.09 per thousand cubic feet compared with the year-ago level of C$2.74. Realized oil and NGLs increased 25.5% to C$53.98 per barrel from C$43.06 in the first quarter of 2018, thanks to narrowing crude oil differentials.

Expenses & Capex

Total expenses incurred in the quarter totaled C$4,028 million, which is lower than C$4,600 million recorded a year ago. Lower production and transportation expenses, coupled with foreign exchange gains reduced overall costs.In the reported quarter, capital expenditure totaled C$977 million.

Dividend& Share Repurchase

As previously announced, Canadian Natural increased first-quarter dividend payout by 12% sequentially, marking the 19th consecutive annual payout hike. The company, which is committed to adding value to its shareholders, returned C$403 million and C$241 million via dividends and stock buybacks, respectively.

Canadian Natural declared dividend of 37.5 Canadian cents a share, which is payable on Jul 1 to its shareholders of record as of Jun 14.

Balance Sheet

As of Mar 31, the company had C$90 million in cash and cash equivalents, and a long-term debt of C$19,323 million, representing a debt-to-capitalization ratio of approximately 37.4%.

Guidance

Canadian Natural reiterated capex and output forecast for 2019. The company expects capital expenditure to be around C$3.7 billion in 2019. It expects liquids output in the band of 782,000-861,000 Bbl/d, while natural gas output is forecasted within 1,485-1,545 MMcf/d. Crude oil and NGL production from North American operations is projected within 221,000-241,000 Bbl/d. Its thermal in situ oil sands production is estimated within 104,000-124,000 Bbl/d.

Second-quarter 2019 liquids production is anticipated within 773,000-831,000 Bbl/d and natural gas output is projected in the band of 1,500-1,530 MMcf/d.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 22.17% due to these changes.

VGM Scores

At this time, Canadian Natural Resources has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 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

Canadian Natural Resources has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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