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On Mar 19, Zacks Investment Research upgraded independent oil and gas company SM Energy Company (SM - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Operating environment and future growth prospects seem bright for SM Energy, as earnings estimates for this Denver, Colorado-based company are on the rise. Over the last 30 days, the Zacks Consensus Estimate for first quarter of 2013 has increased 35.48% to 42 cents per share, while that for 2013 went up 15.82% to $1.83 per share.

The momentum has been strong since SM Energy released its fourth quarter and full-year 2012 earnings results on Feb 20. Adjusted earnings per share came in at 45 cents per share, comfortably beating the Zacks Consensus Estimate of 23 cents on record production.

Total revenue was $444.3 million in the quarter, showing an improvement of 17.1% from $379.5 million in the prior-year quarter. The revenue figure also surpassed the Zacks Consensus Estimate of $414.0 million.

Apart from delivering positive earnings surprises in two of the last four quarters with an average beat of 32.70%, the company also has an impressive long-term expected earnings growth rate of 18.0%.

We expect SM Energy’s attractive oil and gas investments, balanced and diverse portfolio of proved reserves and development drilling opportunities to create long-term value for shareholders.

Additionally, SM Energy has meaningful leasehold positions of the leading US shale plays, including the Bakken, Niobrara, Haynesville, and Granite Wash. We believe these will provide the company with many years of profitable drilling inventory.

Other Stocks to Consider

Other stocks worth considering in the energy sector include EPL Oil & Gas Inc. , Range Resources Corp. (RRC - Analyst Report) and Stone Energy Corporation (SGY - Analyst Report). All these firms – sporting a Zacks Rank #1 (Strong Buy) – offer value and are worth accumulating at current levels.

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