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What's in the Offing for Diamondback (FANG) Q3 Earnings?

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Diamondback Energy, Inc. (FANG - Free Report) is set to release third-quarter 2020 results on Monday Nov 2, after the closing bell.

The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at 34 cents per share and the same for revenues stands at $701.07 million.

Against this backdrop, let’s consider the factors that are likely to impact the company’s September-quarter results.

Factors Likely to Impact Q3 Results

The twin acquisitions of Energen Corporation and Ajax Resources in 2018 transformed Diamondback into one of the leading Permian Basin oil producers, driving significant production growth. The trend is likely to have continued in the third quarter as well. This is because, earlier this month, management had provided an operational update on the third quarter wherein it reported that production of oil and natural gas averaged at 287,300 barrels of oil-equivalent per day (Boe/d) in the quarter under review, beating the Zacks Consensus Estimate of 286,073 Boe/d and also increasing marginally from the year-ago reported figure of 287,138 Boe/d. This production growth is likely to have enhanced Diamondback’s earnings in the third quarter.

However, the Permian pure play’s top line is likely to have been hurt in the third quarter due to weaker year-over-year average oil price realization. Precisely, the average realized crude oil price in the third quarter was $38.75 per barrel, plunging 25.5% from the year-earlier figure of $52.

While a substantial rise in output is expected to have boosted Diamondback’s third-quarter earnings, lower year-over-year crude oil prices might dent its overall results.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Diamondback this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Diamondback has an Earnings ESP of +12.65%.

Zacks Rank: Diamondback carries a Zacks Rank #4 (Sell), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q2 Earnings & Surprise History

Diamondback delivered strong second-quarter 2020 earnings. Better-than-expected production led to this outperformance. Precisely, overall volumes came in at 294.1 thousand barrels of oil equivalent per day (MBOE/d), beating the Zacks Consensus Estimate of 293.3 MBOE/d.

However, the bottom line plunged 91.2% from the year-ago figure of $1.70 due to softness in average oil price realization.

This Permian pure play’s total revenues of $899 million also missed the Zacks Consensus Estimate of $966 million. Moreover, the top line fell 58.4% from the year-earlier figure of $1.02 billion.

As far as the earnings surprise track is concerned, this Midland, TX-based company shows a mixed record with its bottom line having surpassed the Zacks Consensus Estimate thrice in the last four quarterly reports, missing the mark on the remaining occasion. The average surprise is 100.76%. This is depicted in the graph below:

Diamondback Energy, Inc. Price and EPS Surprise

Diamondback Energy, Inc. Price and EPS Surprise

Diamondback Energy, Inc. price-eps-surprise | Diamondback Energy, Inc. Quote

Stocks to Consider

While earnings outperformance looks uncertain for Diamondback, here are some firms worth considering from the energy space on the basis of our model, which shows that these have the perfect combination of ingredients to deliver a positive surprise this reporting cycle:

Marathon Oil Corporation (MRO - Free Report) has an Earnings ESP of +1.50% and is Zacks #3 Ranked at present. The company is scheduled to release earnings on Nov 4.

NuStar Energy L.P. (NS - Free Report) has an Earnings ESP of +2.94% and is presently a #2 Ranked player. The firm is scheduled to release earnings on Nov 5.

Targa Resources, Inc. (TRGP - Free Report) has an Earnings ESP of +33.33% and a Zacks Rank #3, currently. The company is scheduled to release earnings on Nov 5.

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