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Here's Why Cimarex (XEC) is Poised to Beat on Q4 Earnings

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Cimarex Energy Co. (XEC - Free Report) is expected to beat fourth-quarter 2020 earnings estimates when it reports results on Feb 22, after the closing bell.

In the last reported quarter, the upstream company reported adjusted earnings per share of 51 cents, outpacing the Zacks Consensus Estimate of 21 cents, thanks to higher natural gas price realizations and lower production expenses, partially offset by decreased overall production and realized crude prices.

As far as earnings surprise is concerned, the Denver, CO-based company beat the Zacks Consensus Estimate twice in the last four quarters, while missed the same on the other two occasions, with an average surprise of 43.3%. This is depicted in the graph below:

Cimarex Energy Co Price and EPS Surprise

Cimarex Energy Co Price and EPS Surprise

Cimarex Energy Co price-eps-surprise | Cimarex Energy Co Quote

Let’s see how things have shaped up prior to the upcoming earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for earnings of 71 cents per share has seen 12 upward estimate revisions and three downward movements over the past 30 days. The estimated figure suggests a decline of 39.8% from the prior-year reported number.

Further, the Zacks Consensus Estimate for revenues of $425.2 million indicates a 35.3% decline from the prior-year quarter.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Cimarex this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Cimarex has an Earnings ESP of +2.14%. This is because the Most Accurate Estimate for the quarter’s earnings is 73 cents per share while the Zacks Consensus Estimate is 71 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Cimarex currently carries a Zacks Rank #3.

Factors Driving the Better-Than-Expected Earnings

The WTI crude price improved roughly 25% through fourth-quarter 2020. The Zacks Consensus Estimate for fourth-quarter 2020 average realized natural gas price (excluding hedge) is pegged at $1.61 per thousand cubic feet, indicating a rise from the year-ago level of $1.19.

The improved commodity pricing scenario is likely to have supported the exploration and production company, which has a strong presence in the prolific Permian Basin and Mid-Continent resources. Moreover, cost-reduction efforts might have supported its fourth-quarter earnings.

Importantly, during the announcement of the last reported quarterly results, Climarex increased its average total production guidance for 2020 to 250-255 thousand barrels of oil equivalent (MBoe/d). For the fourth quarter, the company expects total output within 215-235 MBoe/d. As such, improved commodity prices and resultant increase in production volumes might have positioned it well for an earnings beat this time around.

Recent Announcement

Cimarex recently announced a dividend hike of 23% to 27 cents ($1.08 on an annualized basis) per share from the previous figure of 22 cents. The dividend is likely to be paid on Jun 1, 2021 to stockholders of record on May 14. Based on the closing price of $49.50 per share on Feb 19, the stock has a dividend yield of 2.2%.

Other Stocks That Warrant a Look

Here are some other firms that you may want to consider as these too have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Diamondback Energy, Inc. (FANG - Free Report) has an Earnings ESP of +8.58% and a Zacks Rank of #2, currently. The company is scheduled to release quarterly earnings on Feb 22. You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources, Inc. (EOG - Free Report) has an Earnings ESP of +16.40% and is a Zacks #2 Ranked player. The company is scheduled to release fourth-quarter results on Feb 25. 

Matador Resources Company (MTDR - Free Report) has an Earnings ESP of +19.90% and a Zacks Rank of 1. It is scheduled to report fourth-quarter results on Feb 23.

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