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Hess (HES) Up 11% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Hess (HES - Free Report) . Shares have added about 11% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Hess due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hess Surpasses Q1 Earnings & Revenue Estimates

Hess Corporation reported adjusted first-quarter 2021 earnings per share of 82 cents, beating the Zacks Consensus Estimate of earnings of 44 cents and improving from the year-ago quarter’s loss of 60 cents.

Notably, quarterly revenues increased to $1,919 million from $1,369 million a year ago. Moreover, the top line beat the Zacks Consensus Estimate of $1,725 million.

Higher price realizations of commodities primarily drove the company’s strong first-quarter results.

Q1 Operational Update

Exploration and Production

In the quarter under review, the Exploration and Production business reported adjusted earnings of $308 million against loss of $120 million a year ago. The business was favored by higher realized oil and gas prices.

Quarterly hydrocarbon production was 333 thousand barrels of oil equivalent per day (MBoe/d), down from 349 MBoe/d in the year-ago period owing to lower contributions from Gulf of Mexico – offshore U.S. resources – and the prolific Bakken play.

Crude oil production decreased from 191 thousand barrels per day (MBbls/d) in first-quarter 2020 to 177 MBbls/d. Moreover, natural gas liquids production totaled 53 MBbls/d, down from 56 MBbls/d in the prior-year quarter. However, natural gas output was 617 thousand cubic feet per day (Mcf/d), up from 611 Mcf/d a year ago.

Worldwide crude oil realization per barrel of $52.52 (excluding the impact of hedging) improved from $42.08 in the year-ago period. Also, worldwide natural gas prices rose to $4.90 per Mcf from the year-ago $3.16. Moreover, the average worldwide natural gas liquids selling price increased to $29.49 per barrel from $9.32 a year ago.

Midstream

From the midstream business, the company generated adjusted net earnings of $75 million, significantly up from $61 million a year ago on improvement in tariff rates and minimum volume commitments.

Operating Expenses

Operating expenses in the first quarter totaled $265 million versus the year-ago $303 million. Marketing costs, however, increased to $518 million from $378 million a year ago. But, exploration expenses contracted to $33 million from $189 million in the year-ago period.

Financials

Quarterly net cash flow from operations was $591 million in the first quarter, reflecting a significant improvement from the year-ago $445 million. Hess’ capital expenditure for exploration and production activities totaled $309 million, down from $631 million in the prior-year quarter.

As of Mar 31, 2021, the company had $1,866 million in cash & cash equivalents. Its long-term debt was recorded at $8,273 million at first quarter-end. Current maturity of the long-term debt is $13 million. Debt to capitalization at quarter-end was 56.5%.

Guidance

Notably, the company expects its 2021 net production (excluding Libya) in the band of 290,000 Boe/d to 295,000 Boe/d.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -38.83% due to these changes.

VGM Scores

At this time, Hess has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hess has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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