Back to top

Image: Shutterstock

What's in the Cards for Diamondback (FANG) in Q2 Earnings?

Read MoreHide Full Article

Diamondback Energy, Inc. (FANG - Free Report) is set to release second-quarter 2021 results on Monday Aug 2, after the closing bell.

The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at $2.27 per share and the same for revenues stands at $1.36 billion.

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

Factors Likely to Impact Q2 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 for the company, a trend that most likely continued in the second quarter as well.

The Zacks Consensus Estimate for oil and natural gas production is pegged at 389,824 barrels of oil equivalent per day (Boe/d), implying an increase from the sequential quarter’s reported figure of 307,422 Boe/d.

This Permian pure play’s top line benefited from the sequential increase in average realized unhedged crude oil price in the first quarter, a trend that most likely continued in the second quarter as well. The Zacks Consensus Estimate for the average realized crude oil price in the second quarter is pegged at $63 per barrel, indicating an increase from the sequential quarter's reported figure of $56.94.

On the flip side, the company’s second-quarter cash capital expenditure outlook is projected in the $350-$400 million range, suggesting growth from the prior-quarter’s reported figure of $296 million.

Hence, the estimated quarterly increase in output and average price realization of crude oil is likely to boost Diamondback’s second-quarter results whereas a projected rise in the sequential capital spending might hamper the same.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Diamondback 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 beating estimates. But that’s not the case here as elaborated below.

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 -2.41%.

Zacks Rank:  Diamondback currently has a Zacks Rank #3, which increases the predictive power of ESP.

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

Highlights of Q1 Earnings & Surprise History

Diamondback delivered strong first-quarter 2021 earnings. Better-than-expected production led to this outperformance. Overall volumes were 307.4 thousand barrels of oil equivalent per day (MBOE/d), beating the Zacks Consensus Estimate of 302.6 MBOE/d.

The company’s adjusted net income per share of 82 cents outpaced the Zacks Consensus Estimate of 80 cents. However, the bottom line plunged 57.5% from the year-ago figure of $1.93 due to weaker average oil price realization.

This Permian pure play’s quarterly revenues of $1.18 billion outperformed the Zacks Consensus Estimate of $1.02 billion and also increased from the year-earlier figure of $899 million.

As far as the earnings surprise track is concerned, this Midland, TX-based company shows a solid record with its bottom line having surpassed the Zacks Consensus Estimate in all the trailing four quarterly reports, the average being 125.76%. 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:

Magellan Midstream Partners, L.P. (MMP - Free Report) has an Earnings ESP of +2.32% and is a #3 Ranked player, presently. The firm is scheduled to release earnings on Jul 29.

The Williams Companies, Inc. (WMB - Free Report) has an Earnings ESP of +2.19% and a Zacks Rank of 3, currently. The firm is scheduled to release earnings on Aug 2.

Magnolia Oil & Gas Corp (MGY - Free Report) has an Earnings ESP of +5.82% and is a #1 Ranked player, presently. The firm is scheduled to release earnings on Aug 3.