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What's in Store for Magnolia Oil & Gas (MGY) in Q1 Earnings?

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Magnolia Oil & Gas Corporation (MGY - Free Report) is set to release first-quarter 2021 results on Wednesday, May 5. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 28 cents per share on revenues of $186.11 million.

Let’s delve into the factors that might have influenced the energy explorer’s performance in the March quarter. But it’s worth taking a look at Magnolia’s previous-quarter performance first.

Highlights of Q4 Earnings & Surprise History

In the last-reported quarter, the independent upstream operator beat the consensus mark owing to better-than-anticipated production volumes. Precisely, the South Texas-focused company’s average daily output of 60,617 barrels of oil-equivalent (boe) surpassed the Zacks Consensus Estimate of 58,812 boe. Magnolia had reported adjusted net income per share of 15 cents, beating the Zacks Consensus Estimate by 5 cents. Moreover, revenues of $149.2 million generated by this firm had come in above the Zacks Consensus Estimate of $141 million.

As far as earnings surprises are concerned, Magnolia Oil & Gas beat the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, delivering a negative earnings surprise of 0.36%, on average. This is depicted in the graph below:

Magnolia Oil & Gas Corp Price and EPS Surprise

Magnolia Oil & Gas Corp Price and EPS Surprise

Magnolia Oil & Gas Corp price-eps-surprise | Magnolia Oil & Gas Corp Quote


Trend in Estimate Revision

The Zacks Consensus Estimate for the first-quarter bottom line remained the same in the last seven days. However, the estimated figure indicates a 354.55% surge year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 2.61% increase from the year-ago period.

Factors to Consider This Quarter

Magnolia is expected to have benefited from the improvement in commodity prices. As a reflection of this price boost, the Zacks Consensus Estimate for the first-quarter average sales price for oil and natural gas are pegged at $57 per barrel and $2.50 per thousand cubic feet, respectively, indicating an increase from the year-ago levels of $45.62 and $1.61. The year-over-year improvement in realizations has most likely buoyed Magnolia’s revenues and cash flows.

The company has also done a fairly admirable job at reducing costs. Apart from a disciplined capital strategy, Laredo Petroleum should realize sizeable savings from operating cost control. Led by reduced Giddings well outgo, the company has managed to restrict adjusted cash costs to under $11 per boe, thereby leading to attractive margins and cash flows. Magnolia has vowed to continue delivering strong cost performance this year. This is expected to have had a positive effect on the company’s first-quarter earnings and margins.

However, on a somewhat bearish note, the company is likely to have faced the repercussions from mid-February’s Texas freeze, which was a week-long spell of severe cold blast that affected Magnolia’s drilling operations, causing lost revenues and additional costs. As a reflection of this, the Zacks Consensus Estimate for the to-be-reported quarter’s production stands at 60,566 boe per day, implying an 11.4% decrease from 68,360 MBOE in the January-March period of 2020. 

What Does Our Model Say?

The proven Zacks model does not conclusively show that Magnolia Oil & Gas is likely to beat estimates in the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Magnolia has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 28 cents per share each.

Zacks Rank: Magnolia currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult for the company this earnings season.

Stocks to Consider

While an earnings beat looks uncertain for Magnolia Oil & Gas, here are some firms from the energy space that you may want to consider on the basis of our model:

Whiting Petroleum Corporation (WLL - Free Report) has an Earnings ESP of +7.27% and a Zacks Rank #1. The firm is scheduled to release earnings on May 5.

You can see the complete list of today’s Zacks #1 Rank stocks here.

NOW Inc. (DNOW - Free Report) has an Earnings ESP of +39.13% and a Zacks Rank #3. The firm is scheduled to release earnings on May 5.

TC Energy Corporation (TRP - Free Report) has an Earnings ESP of +2.67% and a Zacks Rank #3. The firm is scheduled to release earnings on May 7.

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