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How Should You Play Devon Stock Before Q4 Earnings Release?
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Devon Energy Corporation (DVN - Free Report) is expected to report an improvement in its top line and a decline in its bottom line when it reports 2024 results on Feb. 18, after market close.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
The Zacks Consensus Estimate for DVN’s fourth-quarter revenues is pegged at $4.24 billion, indicating growth of 2.2% from the year-ago reported figure.
The Zacks Consensus Estimate for earnings is pegged at $1.00 per share. The Zacks Consensus Estimate for DVN’s fourth-quarter earnings indicates a decline of 29.08% from the year-ago reported figure.
Image Source: Zacks Investment Research
Earnings Surprise History
DVN’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 4.99%.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our model predicts a likely earnings beat for DVN this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is the case here, as you can see below.
Some other stocks in the same sector that have the combination of factors indicating an earnings beat this season are Range Resources Corporation (RRC - Free Report) , Comstock Resources, Inc. (CRK - Free Report) and DT Midstream, Inc. (DTM - Free Report) . RRC, CRK and DTM have an Earnings ESP of +4.28%, +12.50% and +0.28%, respectively, and currently carry a Zacks Rank of 2 each.
Factors Likely to Have Shaped DVN’s Q4 Earnings
Devon continues to benefit from its multi-basin portfolio and high-margin assets. Devon is benefiting from the closure of the acquisition of the Williston Basin business of Grayson Mill Energy in the third quarter of 2024. DVN’s production volume is expected to triple to 150,000 Boe/d from 50,000 Boe/d from this region, which surely boosted fourth-quarter volumes.
Courtesy of strong production from its multi-basin assets, the company expects its fourth-quarter production volumes in the range of 811,000-830,000 barrels of oil equivalent per day (Boe/d). To safeguard itself against fluctuating oil, NGL and natural gas prices, Devon Energy has hedged 2024 production volumes, which will also benefit its fourth-quarter earnings.
Devon Energy lowered its outstanding debt by $1.5 billion since the merger with WPX Energy, which will reduce its annual interest expenses. The company aims to reduce its debt further from the current levels and reduce debts worth $0.5 billion in the third quarter. This debt reduction is likely to have lowered the interest burden and boosted earnings in the fourth quarter.
Fourth-quarter earnings are expected to have benefited from effective cost management, which is likely to keep operating expenses. Cash flow generation capacity allowed management to buy back shares, which is also going to have a positive impact on earnings.
DVN’s Price Performance and Valuation
DVN shares have lost 13.7% in the past three months compared with its industry’s decline of 20.1%.
Image Source: Zacks Investment Research
Devon shares are somewhat inexpensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 4.16X compared with its industry average of 11.39X.
Image Source: Zacks Investment Research
Investment Thesis
The highly productive multi-basin domestic assets of Devon are the primary contributor to its strong performance. The company’s acquisition of Grayson Mill Energy will enable it to maintain high-margin production and strong free cash flow for years. Devon has significant financial flexibility and has been reducing its debt and lowering its annual interest expenses. The drop in interest rates is going to have a positive impact, as it will lower the borrowing costs for long-term projects.
A highly competitive oil and gas industry may limit the company’s capacity to apply for new drilling rights or acquire properties due to competitors who are financially stronger than Devon, with more resources at their disposal.
To Sum Up
Devon’s high-quality domestic assets with a balanced exposure to oil, natural gas and NGL production and its low-cost production structure boost margins.
The company is presently trading at a discount. Those who already own this stock would do well to retain it in their portfolio. Investors might also think about adding this stock to their portfolio at the current low-price levels.
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How Should You Play Devon Stock Before Q4 Earnings Release?
Devon Energy Corporation (DVN - Free Report) is expected to report an improvement in its top line and a decline in its bottom line when it reports 2024 results on Feb. 18, after market close.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
The Zacks Consensus Estimate for DVN’s fourth-quarter revenues is pegged at $4.24 billion, indicating growth of 2.2% from the year-ago reported figure.
The Zacks Consensus Estimate for earnings is pegged at $1.00 per share. The Zacks Consensus Estimate for DVN’s fourth-quarter earnings indicates a decline of 29.08% from the year-ago reported figure.
Image Source: Zacks Investment Research
Earnings Surprise History
DVN’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 4.99%.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our model predicts a likely earnings beat for DVN this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is the case here, as you can see below.
Devon Energy Corporation Price and EPS Surprise
Devon Energy Corporation price-eps-surprise | Devon Energy Corporation Quote
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: DVN has an Earnings ESP of +3.11%.
Zacks Rank: Devon currently carries a Zacks Rank #3.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Some other stocks in the same sector that have the combination of factors indicating an earnings beat this season are Range Resources Corporation (RRC - Free Report) , Comstock Resources, Inc. (CRK - Free Report) and DT Midstream, Inc. (DTM - Free Report) . RRC, CRK and DTM have an Earnings ESP of +4.28%, +12.50% and +0.28%, respectively, and currently carry a Zacks Rank of 2 each.
Factors Likely to Have Shaped DVN’s Q4 Earnings
Devon continues to benefit from its multi-basin portfolio and high-margin assets. Devon is benefiting from the closure of the acquisition of the Williston Basin business of Grayson Mill Energy in the third quarter of 2024. DVN’s production volume is expected to triple to 150,000 Boe/d from 50,000 Boe/d from this region, which surely boosted fourth-quarter volumes.
Courtesy of strong production from its multi-basin assets, the company expects its fourth-quarter production volumes in the range of 811,000-830,000 barrels of oil equivalent per day (Boe/d). To safeguard itself against fluctuating oil, NGL and natural gas prices, Devon Energy has hedged 2024 production volumes, which will also benefit its fourth-quarter earnings.
Devon Energy lowered its outstanding debt by $1.5 billion since the merger with WPX Energy, which will reduce its annual interest expenses. The company aims to reduce its debt further from the current levels and reduce debts worth $0.5 billion in the third quarter. This debt reduction is likely to have lowered the interest burden and boosted earnings in the fourth quarter.
Fourth-quarter earnings are expected to have benefited from effective cost management, which is likely to keep operating expenses. Cash flow generation capacity allowed management to buy back shares, which is also going to have a positive impact on earnings.
DVN’s Price Performance and Valuation
DVN shares have lost 13.7% in the past three months compared with its industry’s decline of 20.1%.
Image Source: Zacks Investment Research
Devon shares are somewhat inexpensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 4.16X compared with its industry average of 11.39X.
Image Source: Zacks Investment Research
Investment Thesis
The highly productive multi-basin domestic assets of Devon are the primary contributor to its strong performance. The company’s acquisition of Grayson Mill Energy will enable it to maintain high-margin production and strong free cash flow for years. Devon has significant financial flexibility and has been reducing its debt and lowering its annual interest expenses. The drop in interest rates is going to have a positive impact, as it will lower the borrowing costs for long-term projects.
A highly competitive oil and gas industry may limit the company’s capacity to apply for new drilling rights or acquire properties due to competitors who are financially stronger than Devon, with more resources at their disposal.
To Sum Up
Devon’s high-quality domestic assets with a balanced exposure to oil, natural gas and NGL production and its low-cost production structure boost margins.
The company is presently trading at a discount. Those who already own this stock would do well to retain it in their portfolio. Investors might also think about adding this stock to their portfolio at the current low-price levels.