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Here's Why Hold Strategy is Apt for EOG Resources (EOG) Stock

EOG Resources Inc. EOG has seen upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Zacks Rank & Price Performance

EOG Resources carries a Zacks Rank #3 (Hold) at present.

The stock has gained 15.5% in the past year compared with the industry’s 12.8% growth. The Oils and Energy sector has risen 13.8% in the same time frame.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Factors Driving the Stock

Favorable Value Score

EOG Resources has an impressive Value Score of B. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a favorable Value Score, combined with a solid Zacks Rank, are the best investment bets.

Robust Outlook

The Zacks Consensus Estimate for EOG Resources’ 2024 earnings is pegged at $12.07 per share, suggesting growth of 3.3% from the year-ago reported figure. The same for revenues is pinned at $25 billion, implying a year-over-year rise of 3.4%.

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The consensus mark for 2025 earnings is pegged at $12.69 per share, indicating a year-over-year improvement of 5.1%. The same for revenues is pinned at $25.8 billion, hinting at a 3.3% increase.

Impressive Earnings Surprise History

EOG Resources’ bottom line outpaced estimates in three of the trailing four quarters and missed once, the average surprise being 7.01%.

Key Business Growth Drivers

EOG's diverse portfolio of high-quality assets across multiple basins, such as the Delaware Basin, Eagle Ford, and Powder River Basin, guarantees stable and scalable production. The company's success in maintaining a low-cost, high-quality inventory through organic exploration sets it up for long-term growth. Notably, the Delaware Basin has shown significant productivity improvements, with fewer drilling days and increased lateral feet per day.

EOG has a strong track of returning cash to shareholders, a key factor for investor confidence. In 2023, the company returned 85% of its free cash flow to shareholders via dividends and share repurchases. In the first quarter of 2024, it declared a regular quarterly dividend of 91 cents per share and repurchased $750 million in shares, demonstrating its commitment to shareholder returns.

EOG Resources is dedicated to sustainability and resilience, with strategic emissions reduction pathways and water reuse programs positioning it well in the evolving energy landscape. The company's initiatives to minimize greenhouse gas (GHG) emissions, such as closed-loop gas capture and continuous methane monitoring, emphasize its focus on environmental stewardship. Since 2018, EOG has significantly reduced its GHG intensity rate and increased its wellhead gas capture rate, which are vital metrics for sustainable operations.

The company’s capital discipline is a cornerstone of its investment strategy, adhering to a premium hurdle rate of 30% at flat commodity prices, ensuring return-focused investments. EOG’s ability to generate significant free cash flow while maintaining a pristine balance sheet underscores its financial prudence and operational efficiency. In the first quarter of 2024, the company generated $1.2 billion in free cash flow, reinforcing its capability to fund growth and return capital to shareholders.

Key Picks

Investors interested in the energy sector may look at some better-ranked stocks like Archrock Inc. AROC, Sunoco LP SUN and GeoPark Ltd. GPRK, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, focusing on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

The Zacks Consensus Estimate for AROC’s 2024 and 2025 EPS is pegged at $1.07 and $1.23, respectively. The company has a Zacks Style Score of A for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.

Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes above 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value and Growth Score of A.

The Zacks Consensus Estimate for SUN’s 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

GeoPark, based in Hamilton, Bermuda, is an explorer, operator and consolidator in the oil and gas sector. The company primarily operates in Chile, Colombia, Brazil and Argentina.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.23 and $3.98, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

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Sunoco LP (SUN) : Free Stock Analysis Report

EOG Resources, Inc. (EOG) : Free Stock Analysis Report

Geopark Ltd (GPRK) : Free Stock Analysis Report

Archrock, Inc. (AROC) : Free Stock Analysis Report

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