A month has gone by since the last earnings report for Southwestern Energy (SWN). Shares have lost about 6.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Southwestern Energy 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 drivers.
Southwestern’s Q2 Earnings Miss Estimates on Lower Gas Production
Southwestern Energy reported second-quarter 2019 adjusted earnings of 8 cents per share, missing the Zacks Consensus Estimate by a penny and declining from the year-ago profit of 18 cent.
Quarterly operating revenues of $667 million failed to beat the Zacks Consensus Estimate of $734 million and also declined from $816 million in the second quarter of 2018.
The weak quarterly results were because of lower gas equivalent production and a decline in the price of the commodity.
Production and Realized Prices
During the second quarter, the company’s total production fell 20.5% year over year to 186 billion cubic feet equivalent (Bcfe).
The company’s average realized gas price for the quarter, including hedges, fell to $1.94 per thousand cubic feet (Mcf) from $2.11 per Mcf a year ago. Oil was sold at $51.60 per barrel compared with the year-earlier level of $59.22. Natural gas liquids were sold at $12.62 per barrel, lower than $15.05 in the year-ago period.
In the quarter under review, operating income from the Exploration and Production (E&P) segment was $30 million, down from $97 million in the last-year quarter.
On a per-Mcfe basis, lease operating expenses were 90 cents compared with the prior-year quarter level of 91 cents. General and administrative expenses per unit of production were 19 cents, flat year over year.
Operating loss at the company’s Midstream Services segment totaled $8 million in the second quarter against a profit of $27 million in the year-ago quarter.
Capex and Debt
Southwestern’s total capital expenditure during the second quarter was approximately $368 million. As of Jun 30, 2019, the company’s long-term debt was $2.3 billion, which represents a debt-to-capitalization ratio of 42.9%.
The upstream energy player announced that it has boosted its capital efficiencies owing to which it will not be spending more than $1.15 billion of capital in 2019. The limit that has been set by the company is below the high end of its prior projection.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -15.83% due to these changes.
At this time, Southwestern Energy 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Southwestern Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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