Yahoo Finance This is How to Play Diamondback (FANG) Ahead of Q1 Earnings
With crude prices spiking over the last few months, there is much anticipation for Diamondback Energy’s FANG first-quarter results, which are set to be released on Apr 30.
Let’s check if now is indeed an opportune time to buy the stock.
Quarterly Projections & Earnings History
Following the recent surge in oil prices, Diamondback is expecting improvement in its Q1 top and bottom lines from the year-ago period. FANG’s Q1 earnings per share (EPS) are forecast to increase 4.2% to $4.27 compared with EPS of $4.10 in Q1 2023. Sales are projected to grow 8.8% to $2.1 billion compared with $1.9 billion a year ago.
The company’s 2024 earnings are now projected to be up 3.7% and climb another 12.1% in 2025 to $18.67 per share. Total sales are forecast to rise 10.2% this year and soar 68% in 2025 to $15.6 billion.
FANG beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two, resulting in an earnings surprise of 0.7%, on average.
Diamondback Energy, Inc. Price and EPS Surprise
Diamondback Energy, Inc. price-eps-surprise | Diamondback Energy, Inc. Quote
What Does the Zacks Model Say?
Our quantitative model suggests that the combination of the following two key elements — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — increases the odds of a positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Diamondback Energy seems poised for an earnings beat as it carries a Zacks Rank of 3 and has an Earnings ESP of +1.66%.
Catalyst for Q1
Diamondback Energy, like all independent exploration and production companies, is buoyed by strength in oil prices. A rise in crude realizations generally lifts the company's earnings and cash flow outlook while pushing its shares higher. This is exactly what happened over the past few months, with oil prices rallying.
Diamondback Energy is expected to have benefited from higher production during the first quarter. The company continues to churn out impressive volumes from its wide inventory of drill-ready locations in the Permian Basin — America's hottest and lowest-cost shale region. Consequently, our expectation for FANG’s average first-quarter volume is pegged at 461,375.1 barrels of oil equivalent per day (BOE/d), up 8.6% from the year-ago quarter’s level of 425,022 BOE/d.
Stock Performance & Valuation
Over the last three years, Diamondback Energy’s stock has skyrocketed 164%, with the company rebounding well from the pandemic. This year, the stock is up an impressive 31.8% to easily top the S&P 500 and the Zacks Oil and Gas Exploration and Production United States industry.
Image Source: Zacks Investment Research
Diamondback’s stock currently trades at 11.03X forward earnings, which is at a discount to the Zacks industry average of 12.18X and well below the S&P 500’s 21.13X.
Bottom Line
While Diamondback’s P/E valuation is reasonable and a needle-moving deal is in the works, it may be enticing to buy the energy explorer with crude prices trading above $80 a barrel.
However, the company's Q1 report may be critical to more upside after such remarkable performance over the last few years. As it is, analysts have not been overly enthusiastic, for the quarter to be reported, with the $4.27 per share estimate being revised a penny lower in the last 7 days. Investors should also note that any dip in oil prices is going to hurt Diamondback Energy, whose production profile is heavily tilted toward crude.
In other words, we wouldn't recommend buying Diamondback Energy stock until it delivers a superior operational performance in the upcoming release.
3 Energy Stocks to Consider as Earnings Approach
Here are some energy firms that you may want to consider on the basis of our model:
MPLX LP MPLX has an Earnings ESP of +4.30% and a Zacks Rank #1 (Strong Buy). The firm is scheduled to release earnings on Apr 30.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The 2024 Zacks Consensus Estimate for MPLX indicates 8.2% year-over-year earnings per unit growth. It has a trailing four-quarter earnings surprise of 7.3%, on average. Valued at around $41.6 billion, MPLX has gained 10.1% in a year.
ExxonMobil XOM has an Earnings ESP of +0.13% and a Zacks Rank #3. The firm is scheduled to release earnings on Apr 26.
The 2024 Zacks Consensus Estimate for ExxonMobil indicates 1.9% year-over-year earnings per share growth. Valued at around $474.5 billion, XOM has edged up 1.4% in a year.
DT Midstream DTM has an Earnings ESP of +6.68% and a Zacks Rank #2 (Buy). The firm is scheduled to release earnings on Apr 30.
DT Midstream beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 9.8%, on average. Valued at around $6.1 billion, DTM has gone up 16.3% in a year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
MPLX LP (MPLX) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
DT Midstream, Inc. (DTM) : Free Stock Analysis Report
