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SM Energy (SM) Down 20.9% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for SM Energy Company (SM - Free Report) . Shares have lost about 20.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
First-Quarter 2017 Results
SM Energy Company’s first-quarter 2017 adjusted earnings of $0.18 per share compared favorably with the Zacks Consensus Estimate of a loss of $0.36 and the year-ago comparable quarter loss of $0.83.
Revenues skyrocketed 160% from $143.1 million in the prior-year quarter to $372.7 million. The top line beat the Zacks Consensus Estimate of $314 million.
Low operating expenses along with higher oil and gas equivalent realized prices supported the strong first-quarter results.
Operational Performance
The company’s first-quarter production came in at 134.4 thousand barrels of oil equivalent per day (MBoe/d), down 9% from the year-ago level of 147.5 MMBoe/d. The decline is attributed to the divestment of producing properties during early March this year.
SM Energy produced 376.6 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 4% year over year. Oil production decreased 13% year over year to 39.2 thousand barrels per day (MBbls/d). Natural gas liquids contributed 32.5 MBbls/d to the total volume, down 12% from the first-quarter 2016.
Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $27.55 compared with $26.74 in the year-ago quarter. Including hedging activities, average realized price of natural gas increased 16% year over year to $3.50 per thousand cubic feet (Mcf). Average realized prices of oil fell 10% to $44.97 per barrel, whereas average realized prices of natural gas liquid grew 42% to $19.18 per barrel.
On the cost front, unit lease operating expenses (LOE) increased 1% year over year to $3.82 per Boe. Transportation expenses, however, decreased to $5.88 per Boe from $6.06 per Boe in the year-ago period. General and administrative expenses rose 3% to $2.08 per Boe from the prior-year level of $2.01. Depletion, depreciation and amortization (DD&A) expenses were down 29% to $11.39 per Boe from the year-ago level of $15.96.
Liquidity
Net cash from operating activities increased to $134.9 million during the quarter from $118.3 million in the year-ago quarter. As of Mar 31, 2017, SM Energy had a cash balance of $659.1 million and long-term debt of $2,898.6 million. The company had a debt-to-capitalization ratio of 52.6% compared with the 53.7% in the preceding quarter.
Operating Expenses
Operating expenses amounted to $207.1 million in the first quarter as against $669.8 million in the year-ago quarter, down approximately 69%. Exploration expenses declined to almost $12 million from $15.3 million in the year-ago quarter.
Guidance
SM Energy now estimates 2017 production in the range of 41.5–44.5 MMBoe, higher by 1.5 MMBoe from the prior guidance. Production for the second quarter is projected between 10.3–10.7 MMBoe. The company has maintained its 2017 capital expenditure budget at $875 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to six lower.
At this time, SM Energy's stock has a strong score of 'A' on both growth and momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% 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.
Based on our scores, the stock is more suitable for growth and momentum investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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SM Energy (SM) Down 20.9% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for SM Energy Company (SM - Free Report) . Shares have lost about 20.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
First-Quarter 2017 Results
SM Energy Company’s first-quarter 2017 adjusted earnings of $0.18 per share compared favorably with the Zacks Consensus Estimate of a loss of $0.36 and the year-ago comparable quarter loss of $0.83.
Revenues skyrocketed 160% from $143.1 million in the prior-year quarter to $372.7 million. The top line beat the Zacks Consensus Estimate of $314 million.
Low operating expenses along with higher oil and gas equivalent realized prices supported the strong first-quarter results.
Operational Performance
The company’s first-quarter production came in at 134.4 thousand barrels of oil equivalent per day (MBoe/d), down 9% from the year-ago level of 147.5 MMBoe/d. The decline is attributed to the divestment of producing properties during early March this year.
SM Energy produced 376.6 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 4% year over year. Oil production decreased 13% year over year to 39.2 thousand barrels per day (MBbls/d). Natural gas liquids contributed 32.5 MBbls/d to the total volume, down 12% from the first-quarter 2016.
Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $27.55 compared with $26.74 in the year-ago quarter. Including hedging activities, average realized price of natural gas increased 16% year over year to $3.50 per thousand cubic feet (Mcf). Average realized prices of oil fell 10% to $44.97 per barrel, whereas average realized prices of natural gas liquid grew 42% to $19.18 per barrel.
On the cost front, unit lease operating expenses (LOE) increased 1% year over year to $3.82 per Boe. Transportation expenses, however, decreased to $5.88 per Boe from $6.06 per Boe in the year-ago period. General and administrative expenses rose 3% to $2.08 per Boe from the prior-year level of $2.01. Depletion, depreciation and amortization (DD&A) expenses were down 29% to $11.39 per Boe from the year-ago level of $15.96.
Liquidity
Net cash from operating activities increased to $134.9 million during the quarter from $118.3 million in the year-ago quarter. As of Mar 31, 2017, SM Energy had a cash balance of $659.1 million and long-term debt of $2,898.6 million. The company had a debt-to-capitalization ratio of 52.6% compared with the 53.7% in the preceding quarter.
Operating Expenses
Operating expenses amounted to $207.1 million in the first quarter as against $669.8 million in the year-ago quarter, down approximately 69%. Exploration expenses declined to almost $12 million from $15.3 million in the year-ago quarter.
Guidance
SM Energy now estimates 2017 production in the range of 41.5–44.5 MMBoe, higher by 1.5 MMBoe from the prior guidance. Production for the second quarter is projected between 10.3–10.7 MMBoe. The company has maintained its 2017 capital expenditure budget at $875 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to six lower.
SM Energy Company Price and Consensus
SM Energy Company Price and Consensus | SM Energy Company Quote
VGM Scores
At this time, SM Energy's stock has a strong score of 'A' on both growth and momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% 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.
Based on our scores, the stock is more suitable for growth and momentum investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.