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Why Is Matador (MTDR) Down 8.2% Since Last Earnings Report?

Zacks Equity Research
Pinnacle Financial (PNFP) delivered earnings and revenue surprises of 10.94% and 3.74%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

It has been about a month since the last earnings report for Matador Resources (MTDR). Shares have lost about 8.2% in that time frame, underperforming the S&P 500.

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

Matador Resources Beat Q1 Earnings Estimates, Revenues Miss

Matador reported first-quarter 2019 adjusted earnings of 19 cents per share, beating the Zacks Consensus Estimate of 16 cents. However, the bottom line declined from the year-ago profit of 36 cents.

Revenues of $173.9 million declined from the year-ago level of $191.2 million and missed the Zacks Consensus Estimate of $197.1 million due to lower commodity price realizations.

First-quarter 2019 earnings were supported by higher production volumes, partially offset by increased lease operating costs and lower commodity price realizations.

Production Rises

During first-quarter 2019, total production volumes averaged 5,395 thousand barrels of oil equivalent (MBOE) (comprising 57.6% oil), higher than 4,075 MBOE recorded a year ago.

The average production volumes of oil were recorded at 34,517 barrels per day (Bbls/d), up from 26,465 Bbls/d in first-quarter 2018. Natural gas production was recorded at 152.5 million cubic feet per day (MMcf/d), up from 112.9 MMcf/d a year ago. Record oil-equivalent production in the Delaware Basin aided the quarterly volumes.

Price Realization Falls

Realized price for oil (including derivatives) was recorded at $50.72 per barrel, down from $60.40 in the year-ago quarter. Also, natural gas price of $2.84 per thousand cubic feet was lower than $3.33 in the prior-year quarter.     

Operating Expenses

The company’s production taxes, transportation and processing costs declined to $3.65 per BOE from $4.37 in the year-ago quarter. Lease operating costs increased from $5.44 per BOE in first-quarter 2018 to $5.78. Plant and other midstream services operating expenses rose to $1.73 per BOE in the quarter from the year-ago period’s $1.04.

Balance Sheet

As of Mar 31, 2019, the company had cash and restricted cash of $46.7 million. Long-term debt totaled $1,398.2 million, which includes $140 million of borrowing under its credit agreement. Its debt-to-capitalization ratio stands at 43.8%. 

Capital Spending

The company spent $193 million through the first quarter of 2019. Matador Resources allocated $177 million of the total amount to drill, equip and complete wells, and $16 million toward midstream operations.

Guidance

Matador Resources expects oil production to increase 1-2% sequentially in the second quarter of the year. Moreover, it anticipates second-quarter natural gas production to decline 7-9% from the prior-year period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 31.64% due to these changes.

VGM Scores

At this time, Matador has a subpar Growth Score of D, 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 top 40% 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 broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Matador has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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