We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why You Should Buy SM Energy (SM) Stock Right Now
Read MoreHide Full Article
SM Energy Company’s (SM - Free Report) stock has surged significantly over the past year. The company has also outperformed the Oil/Energy space, its subindustry and the S&P 500 composite during the same period.
Price Performance
Over the past six months, SM Energy’s stock price has increased 18.6% compared with the broader sector’s rise of 9.8% and the Zacks Oil and Gas-U.S. Exploration and Production industry’s growth of 11.2%. Above all, the S&P 500 has jumped 18.2%.
Image Source: Zacks Investment Research
Given this outperformance, we believe that SM Energy is one of the best-positioned oil companies for sustainable production growth, underpinned by a robust business model. The company undoubtedly merits a place in your portfolio. Our confidence is further bolstered by its Zacks Rank #1 (Strong Buy).
Favorable Style Score
SM Energy is well-poised for progress, as evidenced by its impressive VGM Score of A. Here, V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.
Robust Outlook
The Zacks Consensus Estimate for SM’s 2024 earnings is pegged at $7.15 per share, suggesting growth of 21.4% from the year-ago reported figure, while the same for revenues is $2.9 billion, implying a rise of 22%.
The consensus mark for 2025 earnings is pegged at $8.79 per share, indicating an improvement of 22.9%, while the same for revenues is pinned at $3.1 billion, hinting at a 6.4% year-over-year increase.
Impressive Earnings Surprise History
SM Energy’s bottom line outpaced estimates in the trailing four quarters, the average surprise being 13.8%.
Strategic Acquisition in Uinta Basin
SM Energy has agreed to acquire top-tier oil and gas assets in the Uinta Basin, which will significantly enhance its portfolio. This acquisition is expected to be immediately accretive to key financial metrics, increasing both adjusted EBITDAX and free cash flow by 35% and 45%, respectively, in 2025.
The Uinta Basin assets offer high-margin barrels with a cash production margin projected to increase 11% in 2025. This is due to the higher oil content and lower operating costs of these assets than the Midland Basin.
Enhanced Financial Metrics & Shareholder Returns
SM Energy's strategic acquisition is set to strengthen its financial position and enhance shareholder value. The company plans to maintain a strong balance sheet while increasing its return to capital. An 11% increase in the quarterly dividend to 20 cents per share is expected, starting in the fourth quarter of 2024. Additionally, a new $500-million share repurchase program has been authorized, demonstrating the company's commitment to returning capital to shareholders.
Key Business Tailwinds
With a growing emphasis on crude oil, particularly in the Permian Basin and Eagle Ford regions, SM Energy plans to expand its oil-focused operations in the coming years. The company holds about 155,000 net acres in South Texas, where it operates two drilling rigs and one completion crew. In the Midland Basin, SM Energy controls 111,000 net acres, signaling a positive outlook for sustained oil production growth with favorable operating margins.
SM Energy has shown promising results from its operations in the Austin Chalk region, driven by additional well drilling. Operating wells in the Austin Chalk allows the company to diversify its portfolio and mitigate risks associated with regional supply and demand fluctuations.
As of Apr 30, 2024, SM Energy's 111 wells in the Austin Chalk region reached IP30 (Initial Production over 30 days), yielding approximately 46-77% liquid hydrocarbons. This development is expected to enhance investor value. Additionally, the company has an agreement to expand its Austin Chalk acreage by approximately 8,000 net acres through a drill-to-earn arrangement.
GeoPark, based in Hamilton, Bermuda, is an explorer, operator and consolidator in the oil and gas sector. The company primarily operates in Chile, Colombia, Brazil and Argentina. It has a Zacks Style Score of A for Value and Growth.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.23 and $3.98, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes more than 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value Score of A.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
Williams Companies is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing and transportation of natural gas and natural gas liquids.WMB is paying its shareholders an attractive dividend yielding around 5%.
The Zacks Consensus Estimate for WMB’s 2024 and 2025 EPS is pegged at $1.79 and $2.03, respectively. The company has a Zacks Style Score of B for Growth and A for Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why You Should Buy SM Energy (SM) Stock Right Now
SM Energy Company’s (SM - Free Report) stock has surged significantly over the past year. The company has also outperformed the Oil/Energy space, its subindustry and the S&P 500 composite during the same period.
Price Performance
Over the past six months, SM Energy’s stock price has increased 18.6% compared with the broader sector’s rise of 9.8% and the Zacks Oil and Gas-U.S. Exploration and Production industry’s growth of 11.2%. Above all, the S&P 500 has jumped 18.2%.
Image Source: Zacks Investment Research
Given this outperformance, we believe that SM Energy is one of the best-positioned oil companies for sustainable production growth, underpinned by a robust business model. The company undoubtedly merits a place in your portfolio. Our confidence is further bolstered by its Zacks Rank #1 (Strong Buy).
Favorable Style Score
SM Energy is well-poised for progress, as evidenced by its impressive VGM Score of A. Here, V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.
Robust Outlook
The Zacks Consensus Estimate for SM’s 2024 earnings is pegged at $7.15 per share, suggesting growth of 21.4% from the year-ago reported figure, while the same for revenues is $2.9 billion, implying a rise of 22%.
The consensus mark for 2025 earnings is pegged at $8.79 per share, indicating an improvement of 22.9%, while the same for revenues is pinned at $3.1 billion, hinting at a 6.4% year-over-year increase.
Impressive Earnings Surprise History
SM Energy’s bottom line outpaced estimates in the trailing four quarters, the average surprise being 13.8%.
Strategic Acquisition in Uinta Basin
SM Energy has agreed to acquire top-tier oil and gas assets in the Uinta Basin, which will significantly enhance its portfolio. This acquisition is expected to be immediately accretive to key financial metrics, increasing both adjusted EBITDAX and free cash flow by 35% and 45%, respectively, in 2025.
The Uinta Basin assets offer high-margin barrels with a cash production margin projected to increase 11% in 2025. This is due to the higher oil content and lower operating costs of these assets than the Midland Basin.
Enhanced Financial Metrics & Shareholder Returns
SM Energy's strategic acquisition is set to strengthen its financial position and enhance shareholder value. The company plans to maintain a strong balance sheet while increasing its return to capital. An 11% increase in the quarterly dividend to 20 cents per share is expected, starting in the fourth quarter of 2024. Additionally, a new $500-million share repurchase program has been authorized, demonstrating the company's commitment to returning capital to shareholders.
Key Business Tailwinds
With a growing emphasis on crude oil, particularly in the Permian Basin and Eagle Ford regions, SM Energy plans to expand its oil-focused operations in the coming years. The company holds about 155,000 net acres in South Texas, where it operates two drilling rigs and one completion crew. In the Midland Basin, SM Energy controls 111,000 net acres, signaling a positive outlook for sustained oil production growth with favorable operating margins.
SM Energy has shown promising results from its operations in the Austin Chalk region, driven by additional well drilling. Operating wells in the Austin Chalk allows the company to diversify its portfolio and mitigate risks associated with regional supply and demand fluctuations.
As of Apr 30, 2024, SM Energy's 111 wells in the Austin Chalk region reached IP30 (Initial Production over 30 days), yielding approximately 46-77% liquid hydrocarbons. This development is expected to enhance investor value. Additionally, the company has an agreement to expand its Austin Chalk acreage by approximately 8,000 net acres through a drill-to-earn arrangement.
Other Stocks to Consider
Investors interested in the energy sector may look at some other top-ranked stocks like GeoPark Ltd. (GPRK - Free Report) , Sunoco LP (SUN - Free Report) and The Williams Companies, Inc. (WMB - Free Report) , also currently sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
GeoPark, based in Hamilton, Bermuda, is an explorer, operator and consolidator in the oil and gas sector. The company primarily operates in Chile, Colombia, Brazil and Argentina. It has a Zacks Style Score of A for Value and Growth.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.23 and $3.98, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes more than 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value Score of A.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
Williams Companies is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing and transportation of natural gas and natural gas liquids.WMB is paying its shareholders an attractive dividend yielding around 5%.
The Zacks Consensus Estimate for WMB’s 2024 and 2025 EPS is pegged at $1.79 and $2.03, respectively. The company has a Zacks Style Score of B for Growth and A for Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.