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Here's Why Cabot (COG) is a Must-Add Stock to Your Portfolio
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Cabot Oil & Gas Corporation looks compelling at the moment. Given the company’s strong fundamentals and positive estimate revisions, it seems like this is the right time to add the stock to your portfolio.
Based in Houston, TX, Cabot is a predominantly gas exploration company with producing properties mainly in the continental United States. It focuses on high-impact natural gas-focused drilling in the Marcellus Shale. The company sells its products to local distribution companies, industrial clients, power generation facilities, and gas marketers through pipelines and gathering systems. Notably, Cabot currently has a Zacks Rank #2 (Buy), which means the company is poised to outperform the market.
Let’s delve deeper to analyse the factors that make this upstream energy player an attractive investment option at the moment.
Attractive Asset Base to Fuel Output Growth
Cabot’s portfolio is spread between low-risk/long reserve-life properties and large-volume/rapid-payout assets, with further variety from large prospect inventories that have a broad mix of production and payout profiles. It continues to ramp up its Marcellus program with exceptional results. As of year-end 2018, the company had around 2,900 undrilled locations left in its kitty. In 2019, the company expects to place 80-85 net wells on production in this prolific shale play. While the company’s production grew 7% year over year to 2,014 million cubic feet equivalent per day (Mmcfe/d) in 2018, output in the current year is expected to increase 20% owing to its copious asset base.
Amazing Cost Structure
Cabot continues to improve its industry-leading cost structure. Driven by operational efficiencies, the company was able to reduce 2018 finding and development costs by 14.3% from a year ago to 30 cents per thousand cubic feet equivalent (Mcfe). In case anyone hadn't noticed, it is worth pointing out that Cabot has quietly lowered its cost by more than 65% since 2012, as is evident from the chart below. Management’s ongoing cost improvement efforts should further boost its profit levels going forward.
Balance Sheet Strength
Cabot boasts a conservative balance sheet with $1.2 billion in long-term debt and a manageable debt-to-capital ratio of 37%, much lower than the industry average of 43.5%. This provides the company with ample flexibility to make acquisitions or grow internally.
Increasing Shareholder Value
Cabot is committed to returning more than half of its free cash flow to stock holders through share buybacks and dividends. It has returned more than $1 billion capital to its shareholders last year. In 2018, Cabot increased its quarterly dividend per share by 40%. The company bought back around 38.5 million shares last year and the momentum will continue in the coming years as well.
Bottom-Line Prospects
Over the past 60 days, four analysts have upwardly revised earnings estimates for first-quarter 2019, while only two have decreased the same for Cabot. The Zacks Consensus Estimate for the current quarter has been revised upward from 62 cents per share to 67 cents, which is 139.3% higher than the year-ago figure of 28 cents. In full-year 2019, the bottom line is expected to surge 63.9% from a year ago to $1.95 per share.
Wrapping Up
A clear picture can be derived from the above-mentioned growth drivers, which differentiate Cabot from peers. The upstream energy company has a strong acreage position in the prolific Marcellus shale play, which is reflective of tremendous growth potential. The efficient cost structure of the company can ensure that the targets are achieved well within budget. A strong balance sheet, which a number of its peers lack, provides management with financial flexibility to achieve its goals. Also, management does not hold back from returning capital to its shareholders. The bottom-line prospects of the company further ensure its future possibilities.
Other Stocks to Consider
Investors interested in the energy sector can opt for other top-ranked stocks as given below:
Denver, CO-based Antero Resources Corporation (AR - Free Report) is an upstream energy company. Its top line in 2019 is expected to increase 9% year over year. The stock currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Houston, TX-based ConocoPhillips (COP - Free Report) is an exploration and production giant. In first-quarter 2019, its sales are expected to grow 5.2% year over year. The company currently holds a Zacks Rank #2.
Cactus, Inc. (WHD - Free Report) is a Houston, TX-based oil & gas equipment and services company. Its bottom line in 2019 is expected to increase 11.2% year over year. It currently has a Zacks Rank #2.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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Here's Why Cabot (COG) is a Must-Add Stock to Your Portfolio
Cabot Oil & Gas Corporation looks compelling at the moment. Given the company’s strong fundamentals and positive estimate revisions, it seems like this is the right time to add the stock to your portfolio.
Based in Houston, TX, Cabot is a predominantly gas exploration company with producing properties mainly in the continental United States. It focuses on high-impact natural gas-focused drilling in the Marcellus Shale. The company sells its products to local distribution companies, industrial clients, power generation facilities, and gas marketers through pipelines and gathering systems. Notably, Cabot currently has a Zacks Rank #2 (Buy), which means the company is poised to outperform the market.
Let’s delve deeper to analyse the factors that make this upstream energy player an attractive investment option at the moment.
Attractive Asset Base to Fuel Output Growth
Cabot’s portfolio is spread between low-risk/long reserve-life properties and large-volume/rapid-payout assets, with further variety from large prospect inventories that have a broad mix of production and payout profiles. It continues to ramp up its Marcellus program with exceptional results. As of year-end 2018, the company had around 2,900 undrilled locations left in its kitty. In 2019, the company expects to place 80-85 net wells on production in this prolific shale play. While the company’s production grew 7% year over year to 2,014 million cubic feet equivalent per day (Mmcfe/d) in 2018, output in the current year is expected to increase 20% owing to its copious asset base.
Amazing Cost Structure
Cabot continues to improve its industry-leading cost structure. Driven by operational efficiencies, the company was able to reduce 2018 finding and development costs by 14.3% from a year ago to 30 cents per thousand cubic feet equivalent (Mcfe). In case anyone hadn't noticed, it is worth pointing out that Cabot has quietly lowered its cost by more than 65% since 2012, as is evident from the chart below. Management’s ongoing cost improvement efforts should further boost its profit levels going forward.
Balance Sheet Strength
Cabot boasts a conservative balance sheet with $1.2 billion in long-term debt and a manageable debt-to-capital ratio of 37%, much lower than the industry average of 43.5%. This provides the company with ample flexibility to make acquisitions or grow internally.
Increasing Shareholder Value
Cabot is committed to returning more than half of its free cash flow to stock holders through share buybacks and dividends. It has returned more than $1 billion capital to its shareholders last year. In 2018, Cabot increased its quarterly dividend per share by 40%. The company bought back around 38.5 million shares last year and the momentum will continue in the coming years as well.
Bottom-Line Prospects
Over the past 60 days, four analysts have upwardly revised earnings estimates for first-quarter 2019, while only two have decreased the same for Cabot. The Zacks Consensus Estimate for the current quarter has been revised upward from 62 cents per share to 67 cents, which is 139.3% higher than the year-ago figure of 28 cents. In full-year 2019, the bottom line is expected to surge 63.9% from a year ago to $1.95 per share.
Wrapping Up
A clear picture can be derived from the above-mentioned growth drivers, which differentiate Cabot from peers. The upstream energy company has a strong acreage position in the prolific Marcellus shale play, which is reflective of tremendous growth potential. The efficient cost structure of the company can ensure that the targets are achieved well within budget. A strong balance sheet, which a number of its peers lack, provides management with financial flexibility to achieve its goals. Also, management does not hold back from returning capital to its shareholders. The bottom-line prospects of the company further ensure its future possibilities.
Other Stocks to Consider
Investors interested in the energy sector can opt for other top-ranked stocks as given below:
Denver, CO-based Antero Resources Corporation (AR - Free Report) is an upstream energy company. Its top line in 2019 is expected to increase 9% year over year. The stock currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Houston, TX-based ConocoPhillips (COP - Free Report) is an exploration and production giant. In first-quarter 2019, its sales are expected to grow 5.2% year over year. The company currently holds a Zacks Rank #2.
Cactus, Inc. (WHD - Free Report) is a Houston, TX-based oil & gas equipment and services company. Its bottom line in 2019 is expected to increase 11.2% year over year. It currently has a Zacks Rank #2.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>