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Bear of the Day: Comstock Resources (CRK)

Comstock Resources, Inc. CRK is caught in plunging commodity prices. This Zacks Rank #5 (Strong Sell) has suspended its dividend due to weak natural gas prices.

Comstock Resources is an independent natural gas producer with operations in the Haynesville shale in North Louisiana and East Texas. It has a $2 billion market cap.

Third Miss in a Row in the Fourth Quarter 2023

On Feb 13, 2024, Comstock Resources reported its fourth quarter 2023 results and missed for the third quarter in a row. Earnings were $0.10 versus the Zacks Consensus of $0.16. That's a $0.06 miss.

Natural gas and oil sales, including realized hedging gains, were $354 million with the hedging gain amounting to $4.1 million.

It added 23,000 net acres in the Western Haynesville, bringing its acreage in the play to over 250,000 net acres.

It also had "solid results" in the Haynesville shale drilling program.

Dividend Suspended

With natural gas prices so weak, it's not a surprise that Comstock announced that it plans to suspend its quarterly dividend until natural gas prices improve.

It's also going to reduce the number of operating drilling rigs it is running to 5 from 7. Two of those 5 drilling rigs will continue to be deployed in the Western Haynesville play.

Analysts Cut Earnings Estimates

1 estimate has already been lowered for 2024 and 2025 since the earnings report, but the estimates were being slashed even before the earnings report.

The 2024 Zacks Consensus Estimate has fallen to $1.06 from $1.36 over the last 30 days. The 2025 Zacks Consensus Estimate has plunged to $1.56 from $1.96.

However, both years are expected to see significant earnings growth of 125.5% and 46.9%, because Comstock only earned $0.47 in 2023.

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Zacks Investment Research


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Shares Plunge in the Last 6 Months

Commodity stocks will often move along with the commodity and Comstock is no different. As natural gas has plunged, so has Comstock's shares.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

While the stock appears cheap with a forward P/E of just 6.9, It doesn't make any sense to buy the stock until natural gas prices rebound. Investors don't even get a dividend for their patience.

For investors interested in the natural gas plays, keep an eye on gas prices. You'll want to buy into Comstock when the prices start to rise again.

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