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Devon's Q3 Earnings Surpass Estimates: How to Play the Stock
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Devon Energy Corporation (DVN - Free Report) reported better-than-expected third-quarter 2024 earnings per share on Nov. 5. Earnings and revenues surpassed the respective Zacks Consensus Estimate by 3.8% and 7.2%. The third-quarter performance was driven by strong production volumes from the Delaware Basin, offset marginally by the drop in realized prices of the commodities.
DVN has been reporting strong earnings results, courtesy of solid financial and operational performance from its multi-basin assets. The company surpassed expectations in the last four quarters, with an average earnings surprise of 4.99%.
Image Source: Zacks Investment Research
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Highlights of Devon Stock’s Q3 Earnings
Net production for the third quarter totaled 728,000 barrels of oil equivalent per day (Boe/d), up 9.5% year over year. Actual production volume exceeded the guided range of 670,000-690,000 Boe/d. Strong performance from the Delaware Basin and Powder River Basin boosted year-over-year production volumes.
Natural gas liquids production increased 16.9% year over year to 194,000 barrels per day (Bbl/d). Oil production amounted to 335,000 Bbl/d, up 4.4% on a year-over-year basis, attributed to a strong contribution from the Delaware Basin.
Devon repurchased shares worth $295 million in the third quarter from its $3 billion share-repurchase program. Since the inception of the buyback program in late 2021, the company has repurchased shares worth $3 billion.
Devon declared its fixed quarterly cash dividend of 22 cents per share, payable on Dec. 30, 2024, to shareholders of record at the close of business on Dec. 13, 2024. With the recent pullback in commodity prices and equities, as well as the additional leverage taken on by the company, Devon’s management has decided not to declare a variable dividend in the current quarter. Devon’s capital allocation will now focus on strengthening the balance sheet and returning capital to shareholders through the fixed dividend and share buybacks.
DVN Shares Lag Industry
Devon's stock has underperformed its industry in the last 12 months.
Image Source: Zacks Investment Research
Devon’s Earnings Estimates Decline
The Zacks Consensus Estimate for Devon’s 2024 and 2025 earnings per share has decreased 7.3% and 16.9%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
Factors Acting as Tailwind for Devon Stock
The recent softness in commodity prices acted as a headwind for Devon. However, there are certain factors that boost the performance of this oil and energy stock.
Devon has a multi-basin portfolio and focuses on high-margin assets that hold significant long-term growth potential. Devon also has a diverse commodity mix, with a balanced exposure to oil, natural gas, and natural gas liquid production volumes.
Fourth-quarter production is expected in the range of 811,000-830,000 Boe per day and capital spending is estimated in the band of $915-$985 million. The fourth-quarter production guidance indicates a 13% increase sequentially.
The company continues to expand its operation in high-quality basins through acquisitions. Devon acquired the Williston Basin business of Grayson Mill Energy. This fourth-quarter volume growth will be driven by an estimated 110,000 Boe/d of incremental production from the company’s Williston Basin acquisition.
Devon possesses assets that can deliver sustainable production for many years into the future and provide reliable and affordable energy to its customers. The assets currently owned by the company can sustain the production levels for more than 10 years. The ongoing exploration activities continue to replenish production volumes and add new reserves.
Devon continues to manage costs to boost margins. The company has been reducing its costs by selling higher-cost assets and bringing new lower-cost production assets online. It is also working to reduce its drilling and completion costs and is better aligning personnel with the go-forward business.
Devon Stock Returns Better Than Industry
Devon’s return on equity (ROE) has outperformed the industry average in the trailing 12 months. ROE of DVN was 24.73% compared with the industry average of 15.7%. The company has been investing shareholders fund effectively in profitable projects compared to its peers in the industry, which is evident from its ROE.
Image Source: Zacks Investment Research
Devon’s Shares Are Trading at a Discount
Devon’s shares are inexpensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 4.59X compared with its industry average of 7.11X.
Image Source: Zacks Investment Research
Summing Up
Devon has a balanced exposure to oil, natural gas and NGL production, and its low-cost production structure boosts margins. DVN’s multi-basin exposure and rising production volumes allow it to come out with stable earnings results.
Devon’s shares are trading at a discount and its ROE is better than the industry and currently having a Value Score of A, which indicates the possibility of strong performance. However, a declining earnings estimate and weakness in share price compared with the industry is a concern and hence, investors should wait for a better entry point.
Those who already own this Zacks Rank #3 (Hold) stock would do well to retain it in their portfolio.
Image: Bigstock
Devon's Q3 Earnings Surpass Estimates: How to Play the Stock
Devon Energy Corporation (DVN - Free Report) reported better-than-expected third-quarter 2024 earnings per share on Nov. 5. Earnings and revenues surpassed the respective Zacks Consensus Estimate by 3.8% and 7.2%. The third-quarter performance was driven by strong production volumes from the Delaware Basin, offset marginally by the drop in realized prices of the commodities.
DVN has been reporting strong earnings results, courtesy of solid financial and operational performance from its multi-basin assets. The company surpassed expectations in the last four quarters, with an average earnings surprise of 4.99%.
Image Source: Zacks Investment Research
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Highlights of Devon Stock’s Q3 Earnings
Net production for the third quarter totaled 728,000 barrels of oil equivalent per day (Boe/d), up 9.5% year over year. Actual production volume exceeded the guided range of 670,000-690,000 Boe/d. Strong performance from the Delaware Basin and Powder River Basin boosted year-over-year production volumes.
Natural gas liquids production increased 16.9% year over year to 194,000 barrels per day (Bbl/d). Oil production amounted to 335,000 Bbl/d, up 4.4% on a year-over-year basis, attributed to a strong contribution from the Delaware Basin.
Devon repurchased shares worth $295 million in the third quarter from its $3 billion share-repurchase program. Since the inception of the buyback program in late 2021, the company has repurchased shares worth $3 billion.
Devon declared its fixed quarterly cash dividend of 22 cents per share, payable on Dec. 30, 2024, to shareholders of record at the close of business on Dec. 13, 2024. With the recent pullback in commodity prices and equities, as well as the additional leverage taken on by the company, Devon’s management has decided not to declare a variable dividend in the current quarter. Devon’s capital allocation will now focus on strengthening the balance sheet and returning capital to shareholders through the fixed dividend and share buybacks.
DVN Shares Lag Industry
Devon's stock has underperformed its industry in the last 12 months.
Image Source: Zacks Investment Research
Devon’s Earnings Estimates Decline
The Zacks Consensus Estimate for Devon’s 2024 and 2025 earnings per share has decreased 7.3% and 16.9%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
Factors Acting as Tailwind for Devon Stock
The recent softness in commodity prices acted as a headwind for Devon. However, there are certain factors that boost the performance of this oil and energy stock.
Devon has a multi-basin portfolio and focuses on high-margin assets that hold significant long-term growth potential. Devon also has a diverse commodity mix, with a balanced exposure to oil, natural gas, and natural gas liquid production volumes.
Fourth-quarter production is expected in the range of 811,000-830,000 Boe per day and capital spending is estimated in the band of $915-$985 million. The fourth-quarter production guidance indicates a 13% increase sequentially.
The company continues to expand its operation in high-quality basins through acquisitions. Devon acquired the Williston Basin business of Grayson Mill Energy. This fourth-quarter volume growth will be driven by an estimated 110,000 Boe/d of incremental production from the company’s Williston Basin acquisition.
Devon possesses assets that can deliver sustainable production for many years into the future and provide reliable and affordable energy to its customers. The assets currently owned by the company can sustain the production levels for more than 10 years. The ongoing exploration activities continue to replenish production volumes and add new reserves.
Devon continues to manage costs to boost margins. The company has been reducing its costs by selling higher-cost assets and bringing new lower-cost production assets online. It is also working to reduce its drilling and completion costs and is better aligning personnel with the go-forward business.
Devon Stock Returns Better Than Industry
Devon’s return on equity (ROE) has outperformed the industry average in the trailing 12 months. ROE of DVN was 24.73% compared with the industry average of 15.7%. The company has been investing shareholders fund effectively in profitable projects compared to its peers in the industry, which is evident from its ROE.
Image Source: Zacks Investment Research
Devon’s Shares Are Trading at a Discount
Devon’s shares are inexpensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 4.59X compared with its industry average of 7.11X.
Image Source: Zacks Investment Research
Summing Up
Devon has a balanced exposure to oil, natural gas and NGL production, and its low-cost production structure boosts margins. DVN’s multi-basin exposure and rising production volumes allow it to come out with stable earnings results.
Devon’s shares are trading at a discount and its ROE is better than the industry and currently having a Value Score of A, which indicates the possibility of strong performance. However, a declining earnings estimate and weakness in share price compared with the industry is a concern and hence, investors should wait for a better entry point.
Those who already own this Zacks Rank #3 (Hold) stock would do well to retain it in their portfolio.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.