A month has gone by since the last earnings report for Concho Resources Inc. . Shares have lost about 12.6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is CXO 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 catalysts.
First-Quarter 2018 Results
Concho Resources reported strong first-quarter 2018 revenues and earnings results on the back of higher commodity-price realizations and robust production growth.
The company reported adjusted net earnings per share of $1.00, comfortably beating the Zacks Consensus Estimate of 81 cents. The bottom line also improved significantly from the prior-year quarter’s adjusted income of 49 cents per share.
Concho’s total operating revenues for the first quarter amounted to $947 million, which increased substantially from $612 million a year ago. The top line further surpassed the Zacks Consensus Estimate of $804 million.
Operating revenues from oil sales witnessed a year-over-year increase of 58% to $793 million while gas revenues increased by 4% from the prior-year quarter to $154 million.
Volume Analysis
Concho's average quarterly volume increased 26.5% year over year to 227.9 thousand barrels of oil equivalent per day (MBoe/d), exceeding the high-end of the company’s guidance range. Of the volume, 63.1% consisted of liquids. Daily oil output was up 26.6% to 143.8 thousand barrels while natural gas production was 505 million cubic feet (up 24.2%).
Realized Prices
The average realized natural gas price jumped about 13% from the year-ago quarter to $3.39 per thousand cubic feet while average oil-price realization increased 25% to $61.29 per barrel. Overall, the company fetched $46.17 per barrel compared with $37.47 a year ago.
Strategic Strides During Q1
During the first quarter, Concho entered into major strategic acquisition and divestment deals to bolster long-term growth. The company jettisoned its non-core acreage in Ward and Reeves counties to private buyers for $280 million. It also closed a strategic trade to upgrade its core development area in the Northern Midland Basin.
Concho entered a major strategic deal in the first quarter to acquire its rival, RSP Permian Inc. The deal is expected to close by the third quarter of 2018. The $9.5-million mega-deal, to strengthen Concho’s Permian foothold, marks the largest takeover in the U.S. oil and gas exploration and production industry since 2012. It is also the biggest pure-Permian deal ever.
Financial Position
As of Mar 31, Concho had long-term debt of $2,370 million, representing a debt-to-capitalization ratio of 19.6 %, thus witnessing an impressive decline from the leverage of 23.2% as of Dec 31.
Outlook
Capitalizing on its enviable acreage of low-risk top-tier assets and a multiyear drilling inventory, Concho raised its production outlook for 2018. The company now expects output to grow 18 against the prior guidance of 16-20%. Capital expenditure guidance for 2018 remains intact at about $2 billion. Notably, the second-quarter output levels are expected to be between 226 MBoe/d and 230 MBoe/d.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions higher for the current quarter compared to eight lower.
Concho Resources Inc. Price and Consensus
VGM Scores
At this time, CXO has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, CXO has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Concho Resources (CXO) Down 12.6% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Concho Resources Inc. . Shares have lost about 12.6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is CXO 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 catalysts.
First-Quarter 2018 Results
Concho Resources reported strong first-quarter 2018 revenues and earnings results on the back of higher commodity-price realizations and robust production growth.
The company reported adjusted net earnings per share of $1.00, comfortably beating the Zacks Consensus Estimate of 81 cents. The bottom line also improved significantly from the prior-year quarter’s adjusted income of 49 cents per share.
Concho’s total operating revenues for the first quarter amounted to $947 million, which increased substantially from $612 million a year ago. The top line further surpassed the Zacks Consensus Estimate of $804 million.
Operating revenues from oil sales witnessed a year-over-year increase of 58% to $793 million while gas revenues increased by 4% from the prior-year quarter to $154 million.
Volume Analysis
Concho's average quarterly volume increased 26.5% year over year to 227.9 thousand barrels of oil equivalent per day (MBoe/d), exceeding the high-end of the company’s guidance range. Of the volume, 63.1% consisted of liquids. Daily oil output was up 26.6% to 143.8 thousand barrels while natural gas production was 505 million cubic feet (up 24.2%).
Realized Prices
The average realized natural gas price jumped about 13% from the year-ago quarter to $3.39 per thousand cubic feet while average oil-price realization increased 25% to $61.29 per barrel. Overall, the company fetched $46.17 per barrel compared with $37.47 a year ago.
Strategic Strides During Q1
During the first quarter, Concho entered into major strategic acquisition and divestment deals to bolster long-term growth. The company jettisoned its non-core acreage in Ward and Reeves counties to private buyers for $280 million. It also closed a strategic trade to upgrade its core development area in the Northern Midland Basin.
Concho entered a major strategic deal in the first quarter to acquire its rival, RSP Permian Inc. The deal is expected to close by the third quarter of 2018. The $9.5-million mega-deal, to strengthen Concho’s Permian foothold, marks the largest takeover in the U.S. oil and gas exploration and production industry since 2012. It is also the biggest pure-Permian deal ever.
Financial Position
As of Mar 31, Concho had long-term debt of $2,370 million, representing a debt-to-capitalization ratio of 19.6 %, thus witnessing an impressive decline from the leverage of 23.2% as of Dec 31.
Outlook
Capitalizing on its enviable acreage of low-risk top-tier assets and a multiyear drilling inventory, Concho raised its production outlook for 2018. The company now expects output to grow 18 against the prior guidance of 16-20%. Capital expenditure guidance for 2018 remains intact at about $2 billion. Notably, the second-quarter output levels are expected to be between 226 MBoe/d and 230 MBoe/d.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions higher for the current quarter compared to eight lower.
Concho Resources Inc. Price and Consensus
Concho Resources Inc. Price and Consensus | Concho Resources Inc. Quote
VGM Scores
At this time, CXO has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, CXO has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.