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Is a Beat Likely for Magnolia (MGY) This Earnings Season?

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Magnolia Oil & Gas Corporation (MGY - Free Report) is set to release second-quarter 2021 results on Tuesday Aug 3. The current Zacks Consensus Estimate for the to-be-reported quarter’s profit is pegged at 37 cents per share while the same for revenues stands at $229.42 million.

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

Highlights of Q1 Earnings & Surprise History

In the last reported quarter, the independent upstream operator’s bottom line beat the consensus mark owing to better-than-anticipated production volumes. This South Texas-focused company’s average daily output of 62,262 barrels of oil equivalent (boe) surpassed the Zacks Consensus Estimate of 60,566 boe.

Total revenues came in at $207.66 million, ahead of the Zacks Consensus Estimate of $194 million. Moreover, the top line rose 14.7% from the year-ago level of $181 million.

As far as earnings surprises are concerned, Magnolia’s bottom line beat the Zacks Consensus Estimate in three of the last four quarters and missed the mark in the remaining one, delivering a surprise of 22.86%, 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 second-quarter bottom line moved north in the past seven days. Moreover, the estimated figure indicates a 562.50% surge year over year. The Zacks Consensus Estimate for revenues suggests a 176.94% increase from the year-ago period’s reported figure.

Factors to Consider for Second 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 second-quarter average sales price for oil and natural gas is pegged at $62 per barrel and $2.53 per thousand cubic feet, respectively, indicating an increase from the corresponding year-ago reported levels of $19.68 and $1.35. The year-over-year betterment in realizations is most likely to have buoyed Magnolia’s revenues and cash flows.

The company also did a fairly admirable job at reducing costs. Led by lower outgo in the Giddings field, the company managed to restrict adjusted cash costs, thereby leading to attractive margins and cash flows. Magnolia is intent on delivering a continued strong cost performance this year. This is expected to have aided the company’s second-quarter earnings and margins.

On a further bullish note, Magnolia completed numerous drilled but uncompleted (DUC) wells in the Karnes area in late first quarter. With this, Karnes will account for the majority of the company's second-quarter volume gain. As an evidence, the company projects the to-be-reported quarter’s production at 66,000 boe per day, implying a 6% sequential rise and a 2.9% increase from 64,146 boe in the April-June period of 2020.

What Does Our Model Say?

Our proven Zacks model predicts an earnings beat for Magnolia 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.

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 +5.82%.

Zacks Rank:  Magnolia currently has a Zacks Rank of 1, which increases the predictive power of ESP.

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

Other Stocks to Consider

Some other firms worth considering from the  energy  space on the basis of our model that shows that these too have the right combination of elements to beat on earnings this season are as follows:

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

ProPetro Holding Corp. (PUMP - Free Report) has an Earnings ESP of +24.21% and is a #3 Ranked player, presently. The firm is scheduled to release earnings on Aug 3.

APA Corporation (APA - Free Report) has an Earnings ESP of +7.02% and is Zacks #1 Ranked, currently. The firm is scheduled to release earnings on Aug 4.