Laredo Petroleum, Inc.’s (LPI - Free Report) strong fundamentals and healthy liquidity along with growth expectations make it a good investment choice. Moreover, its strategic initiatives and oil hedges bode well.
Let’s focus on the factors that make this currently Zacks Rank #1 (Strong Buy) stock a strong investment pick. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2020 earnings per share has moved north to $9.22, improving 88.2% in the past 60 days.
The Zacks Consensus Estimate for 2021 earnings is pegged at $10.22 per share in the past 60 days against the previous loss estimate of $2.92.
Laredo Petroleum’s trailing four-quarter earnings surprise is 12.47%, on average.
On Feb 4, 2020, the company completed a transaction worth $22.5 million acquiring 1,180 net acres and divesting 80 net acres in Howard County, TX. Also, on Apr 30, it closed an acquisition of 180 net acres in the same location for $0.6 million. Further, in the same month, it sold 80 net acres and working interests from two producing wells in Glasscock County, TX for a total sales price of $0.7 million.
Moreover, the company anticipates capital expenditures for 2020 to be $340-$350 million and the same for 2021 to be $325-$350 million.
Also, for the second half of 2020, Laredo Petroleum hedged 4.8 million barrels of oil and for 2021, the company hedged approximately 70% of its expected oil production.
Steady completions activity in Howard County along with increased commodity prices and hedges for 2021 are likely to generate an estimated $120 million of additional cash flow next year.
Total liquidity including cash and cash equivalents of $21 million was $402 million as of Aug 4. Moreover, the company’s available credit capacity amounts to $381 million.
The stock has gained 4%, outperforming the industry’s rise of 1.9% in the quarter-to-date period.
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 17.17%, comparing favorably with the industry’s 3.77%. This uptrend reflects its higher efficiency in utilizing its shareholders’ funds than its peers.
Other Stocks to Consider
A few other top-ranked stocks are EOG Resources, Inc. (EOG - Free Report) , Cimarex Energy Co (XEC - Free Report) and Concho Resources Inc. (CXO - Free Report) , all carrying a Zacks Rank #2 (Buy), presently.
EOG Resources has a long-term (three-five years) earnings growth rate of 8.38%. The Zacks Consensus Estimate for 2020 earnings has moved 168.4% north in the past 60 days.
Cimarex Energy has a long-term earnings growth rate of 6.31%. It delivered an earnings surprise of 7.06%, on average, for the trailing four quarters.
Concho Resources has a long-term earnings growth rate of 11.93%. It delivered an earnings surprise of 67.15%, on average, for the trailing four quarters.
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