Why Is SM Energy (SM) Up 13.4% Since Last Earnings Report?
It has been about a month since the last earnings report for SM Energy (SM). Shares have added about 13.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is SM Energy due for a pullback? 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.
SM Energy Q2 Earnings Beat Estimates
SM Energy’s second-quarter 2023 adjusted earnings of $1.28 per share surpassed the Zacks Consensus Estimate of $1.02. The bottom line, however, fell from the year-ago quarter’s earnings of $2.19 per share.
Total quarterly revenues of $551 million declined from $992 million in the year-ago quarter and missed the Zacks Consensus Estimate of $555 million.
The better-than-expected quarterly earnings is owing to increased oil equivalent production. This was offset partially by lower commodity prices.
Operational Performance:
Production
SM Energy’s second-quarter production totaled 154.4 thousand barrels of oil equivalent per day (MBoe/d) (almost 42% oil), up 5% from the year-ago level of 146.6 MBoe/d and came higher than the Zacks Consensus Estimate of 151 MBoe/d.
Oil production of SM Energy declined 4% year over year to 64.5 thousand barrels per day (MBbls/d) but beat the Zacks Consensus Estimate of 58 MBbls/d. The company produced 370.4 million cubic feet per day of natural gas in the quarter, up 7% year over year. Natural gas liquids contributed 28.2 MBbls/d to the total production volume, which jumped 32%.
Realized Prices
Before the effects of derivative settlements, the average realized price per Boe was $38.89 compared with $74.23 in the year-ago quarter. The average realized oil price plunged 34% to $72.12 per barrel. The Zacks Consensus Estimate of $77 per barrel for oil price also reflects a year-over-year decline.
The average realized price of natural gas declined 73% year over year to $2.07 per thousand cubic feet, while that for natural gas liquids declined 50% to $20.83 per barrel.
Costs & Expenses
On the cost front, unit lease operating expenses of SM Energy decreased 3% year over year to $4.98 per Boe. General and administrative expenses decreased 8% to $1.96 per Boe from the prior year's $2.12. However, transportation expenses increased by 1% to $2.89 per Boe.
Total hydrocarbon production expenses of SM Energy in the quarter were $145.6 million compared with the year-ago level of $165.6 million. Total exploration expenses were $14.9 million, lower than the year-ago figure of $20.9 million.
Total operating expenses in the second quarter declined to $341.4 million from the year-ago period’s $479.3 million.
Capex
The capital expenditure of SM Energy in the June quarter was $309.3 million. It generated an adjusted free cash flow of $94.8 million in the reported quarter.
Balance Sheet
As of Jun 30, 2023, SM Energy had cash and cash equivalents of $378.2 million. It had a net debt of $1.2 billion at the second-quarter end.
Guidance
For the third quarter, SM Energy projects production at roughly 14 MMBoe. Of the total production, oil will probably contribute 44%. For 2023, the upstream energy player projects production in the 53.5-55.5 MMBoe band.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 16.69% due to these changes.
VGM Scores
At this time, SM Energy has an average Growth Score of C, 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 A. 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, SM Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
SM Energy belongs to the Zacks Oil and Gas - Exploration and Production - United States industry. Another stock from the same industry, EQT Corporation (EQT), has gained 3.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
EQT Corporation reported revenues of $993.08 million in the last reported quarter, representing a year-over-year change of -38.4%. EPS of -$0.17 for the same period compares with $0.83 a year ago.
EQT Corporation is expected to post a loss of $0.03 per share for the current quarter, representing a year-over-year change of -102.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -31.4%.
EQT Corporation has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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