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Will Volatile Market Conditions Limit Encana's (ECA) Growth?
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We issued an updated research report on natural gas exploration and production company, Encana Corporation on Aug 16, 2016. The company has a huge inventory of reserves and a resource base capable of robust production growth.
However, with both oil and natural gas prices still remaining low, Encana's revenues, earnings and cash flows are likely to be affected. This is reflected in the company’s Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Encana is one of the largest natural gas companies in North America with a diverse/high quality portfolio of natural gas assets spread over Canada and the U.S. The company holds a highly competitive land and resource position in a number of the most promising shale and tight gas resource plays of the regions. This provides the company with a low risk, long life, and sustainable growth profile.
In terms of financial performance, Encana reported earnings per share of 10 cents in the second quarter of 2016. Notably, the Zacks Consensus Estimate was of a loss of 8 cents per share, while the company had incurred adjusted loss of 20 cents per share in the year-ago quarter. Lately, Encana has been focusing on cost-reduction activities and divestment of high-cost low-profit assets so as to gain financial flexibility to better handle the current volatile market conditions.
However, Encana is a firm in the upstream industry and hence, its profit is influenced by commodity price fluctuations. The company’s large exposure to natural gas remains a key area of concern as the commodity price is still languishing below the key psychological level of $3 per MMBtu.
Additionally, Encana’s highly-leveraged balance sheet (long-term debt of over $5.7 billion as well as a weak cash position indicate that Encana's financial position is under pressure. A prolonged period of low commodity prices will only worsen this problem.
Stocks to Consider
Some better-ranked players in the energy space include Sasol Ltd. (SSL - Free Report) , Murphy USA Inc. (MUSA - Free Report) and North Atlantic Drilling Limited . All these stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Will Volatile Market Conditions Limit Encana's (ECA) Growth?
We issued an updated research report on natural gas exploration and production company, Encana Corporation on Aug 16, 2016. The company has a huge inventory of reserves and a resource base capable of robust production growth.
However, with both oil and natural gas prices still remaining low, Encana's revenues, earnings and cash flows are likely to be affected. This is reflected in the company’s Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Encana is one of the largest natural gas companies in North America with a diverse/high quality portfolio of natural gas assets spread over Canada and the U.S. The company holds a highly competitive land and resource position in a number of the most promising shale and tight gas resource plays of the regions. This provides the company with a low risk, long life, and sustainable growth profile.
In terms of financial performance, Encana reported earnings per share of 10 cents in the second quarter of 2016. Notably, the Zacks Consensus Estimate was of a loss of 8 cents per share, while the company had incurred adjusted loss of 20 cents per share in the year-ago quarter. Lately, Encana has been focusing on cost-reduction activities and divestment of high-cost low-profit assets so as to gain financial flexibility to better handle the current volatile market conditions.
However, Encana is a firm in the upstream industry and hence, its profit is influenced by commodity price fluctuations. The company’s large exposure to natural gas remains a key area of concern as the commodity price is still languishing below the key psychological level of $3 per MMBtu.
Additionally, Encana’s highly-leveraged balance sheet (long-term debt of over $5.7 billion as well as a weak cash position indicate that Encana's financial position is under pressure. A prolonged period of low commodity prices will only worsen this problem.
Stocks to Consider
Some better-ranked players in the energy space include Sasol Ltd. (SSL - Free Report) , Murphy USA Inc. (MUSA - Free Report) and North Atlantic Drilling Limited . All these stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>