Callon Petroleum Company
(CPE - Snapshot Report
) is cashing in on higher crude prices as earnings are expected to jump by 124% in 2011. This Zacks #1 Rank (strong buy) is also a value stock, with a forward P/E of only 8.9.
Callon Petroleum is a small oil and natural gas explorer with operations in Louisiana, Texas and the offshore waters of the Gulf of Mexico.
2008 v. 2011
A lot has happened to Callon's shares since I last covered the company in July 2008. Back then, crude was at a record high of $147 a barrel and shares were soaring on a huge first quarter earnings beat and rising full year guidance.
Then the bottom fell out of the crude market and we had the financial crisis and the Great Recession.
Shares bottomed out in 2009 but are nowhere near the highs of 2008.
Excellent Track Record of Surprising on the Estimate
On Aug 8, Callon reported its second quarter results and surprised on the Zacks Consensus for the second time in a row. But it has also actually surprised 9 out of the last 10 quarters which is a tremendous track record even as its shares have lagged.
Callon blew it out this quarter, beating the Zacks Consensus by 193%. Earnings per share were 41 cents compared to the consensus of just 14 cents. It made just 7 cents a year ago.
Crude oil revenue rose 83% to $29.1 million compared to just $15.9 million a year ago. Natural gas revenue also increased 37% to $7.7 million from $5.7 million a year ago.
The average price per barrel of oil (Bbl) rose to $105.75 from $74.03 last year after hedging impact. Similarly, the company also saw higher average natural gas prices of $5.58 Mcf from $5.22 last year.
2011 Zacks Consensus Estimate Rises
After the good quarter, the analysts moved to raise full year estimates.
The 2011 Zacks Consensus jumped to 67 cents from 56 cents in the last 30 days as 2 estimates moved higher.
That is earnings growth of 124% as the company made just 30 cents in 2010.
Callon is a Value Stock
Even before the recent sell-off Callon had attractive valuations. Any pullback just makes it cheaper.
In addition to a low P/E, Callon also has a price-to-book of 2.0. A P/B ratio under 3.0 usually indicates value.
Callon also has other excellent fundamentals, such as a 1-year return on equity (ROE) of 34.2%.
Callon will be subjected to the whims of crude and natural gas prices but if you're looking for a smaller energy play with solid valuations, this could be the company for you.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.