Back to top

Image: Bigstock

Here's Why You Should Steer Clear Of Approach (AREX) Now

Read MoreHide Full Article

Shares of Approach Resources, Inc. have slumped 77.1% year to date compared with the industry’s 16.4% decline. Moreover, this Zacks Rank #4 (Sell) stock has been seeing downward estimate revisions for its bottom line for a while now.

Downward Estimate Revisions

The Zacks Consensus Estimate for the company’s 2019 loss per share of 40 cents has moved south from a loss of 32 cents in the past 60 days. 

Moreover, for 2020, the consensus mark for the company’s loss per share has been revised wider to 23 cents from 16 cents over the same period.

Reasons for the Downgrade

The pricing scenarios of both crude and natural gas have been weak, due to an oversupplied market, and the global economic slowdown thwarting energy demand.  

Despite the weak demand picture for crude amid a global supply glut, the Organization of the Petroleum Exporting Countries and its allies did not come to any conclusion in their recent technical meeting on the further cut in production volumes. This is weighing on the oil prices.

Moreover, huge stockpiles of natural gas in the domestic market are keeping the commodity price under pressure.

Being an explorer and producer of oil and natural gas, this weak pricing environment is hurting Approach’s bottom line.

This upstream energy player also has weak financials, as reflected by the stock’s debt to capitalization ratio of 64.5%, which is significantly higher than 42.5% of the industry it belongs to.

Additionally, being a leading Permian producer, the pipeline bottleneck problem in the prolific basin is hurting the company’s operations.

Stocks to Consider

A few better-ranked players in the energy space include National Oilwell Varco Inc. (NOV - Free Report) , World Fuel Services Corporation and Delek Logistics Partners LP (DKL - Free Report) . All stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Oilwell is likely to see earnings growth of 75% in 2019.

World Fuel beat the Zacks Consensus Estimate in the trailing four quarters, the average positive earnings surprise being 16.4%.

Delek Logistics is likely to see earnings growth of 4.9% through 2019.

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 >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


NOV Inc. (NOV) - free report >>

Delek Logistics Partners, L.P. (DKL) - free report >>

Published in