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Diamondback (FANG) Down 0.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Diamondback Energy (FANG). Shares have lost about 0.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Diamondback 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.

Diamondback Q1 Earnings Beat Estimates on Strong Production

Diamondback Energy reported first-quarter 2024 adjusted earnings per share of $4.50, which beat the Zacks Consensus Estimate of $4.29 and came ahead of the year-ago adjusted figure of $4.10. The outperformance primarily reflects stronger production and a drop in overall realization.

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Meanwhile, revenues of $2.2 billion rose 15.7% from the year-ago quarter’s sales and outperformed the Zacks Consensus Estimate by $137 million.

In good news for investors, the company is using the excess cash to reward them with dividends and buybacks. As part of that, FANG’s board of directors declared a quarterly cash dividend of 90 cents per share to its common shareholders of record on May 15. The payout will be made on May 22. In addition to the regular dividend, FANG declared a special dividend of $1.07 per share.

The company also executed $42 million of share repurchases during the first quarter of 2024 at $149.50 apiece.

Production & Realized Prices

FANG’s production of oil and natural gas averaged 461,110 barrels of oil equivalent per day (BOE/d), comprising 59% oil. The figure was up 8.5% from the year-ago quarter but marginally missed our estimate of 461,375.1 BOE/d. While crude and natural gas output increased 8.7% and 5.6% year over year, respectively, natural gas liquids volumes rose 10.7%.

The average realized oil price during the most recent quarter was $75.06 per barrel, 2.7% higher than the year-ago realization of $73.11 and ahead of our projection of $70.81. Meanwhile, the average realized natural gas price plunged to 99 cents per thousand cubic feet (Mcf) from $1.46 in the year-ago period and came below our estimate of $1.39. Overall, the upstream oil and gas company fetched $50.07 per barrel compared with $49.72 a year ago.

Costs & Financial Position

Diamondback’s first-quarter cash operating cost was $11.52 per barrel of oil equivalent (BOE) compared with $11.61 in the prior-year quarter and our projection of $11.46. The drop in costs compared to the year-ago period reflected a steep decrease in production and ad valorem taxes to $2.84 per BOE from $4.05 in the first quarter of 2023. On a somewhat bearish note, FANG’s lease operating expenses increased 21.1% year over year to $6.08 per BOE, while gathering and transportation expenses rose in the first quarter of 2024 to $1.84 per BOE from $1.78 during the corresponding period of 2023.

Diamondback spent $609 million in capital expenditure — $580 million on drilling and completion, $25 million on infrastructure, environment and $4 million on midstream. The company booked $791 million in free cash flow in the first quarter.

As of Mar 31, the Permian-focused operator had approximately $896 million in cash and cash equivalents and $6.6 billion in long-term debt, representing a debt-to-capitalization of 26.9%.

Guidance

FANG reiterated that it looks to pump around 458,000-466,000 BOE/d of hydrocarbon in 2024. Of this, oil volumes are likely to be between 270,000 and 275,000 barrels per day. The company also stuck to its forecast of a capital spending budget between $2.3 billion and $2.55 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Diamondback has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Diamondback has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Diamondback is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, Antero Resources (AR), a stock from the same industry, has gained 4.8%. The company reported its results for the quarter ended March 2024 more than a month ago.

Antero Resources reported revenues of $1.12 billion in the last reported quarter, representing a year-over-year change of -20.3%. EPS of $0.07 for the same period compares with $0.51 a year ago.

For the current quarter, Antero Resources is expected to post a loss of $0.08 per share, indicating a change of +71.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -40.3% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Antero Resources. Also, the stock has a VGM Score of D.

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Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report

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