For Immediate Release
Chicago, IL – March 25, 2022 – Zacks Equity Research shares Devon Energy (DVN) as the Bull of the Day and Hyatt Hotels Corp. (H) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on EOG Resources, Inc. (
EOG Quick Quote EOG - Free Report) , Exxon Mobil Corp. ( XOM Quick Quote XOM - Free Report) and Chevron Corp. ( CVX Quick Quote CVX - Free Report) .
Here is a synopsis of all five stocks:
Devon Energy is cashing in on the rise in oil and natural gas. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 85% in 2022 as it pays out record dividends.
Devon Energy is an oil and gas producer in the United States with a focus on the Delaware Basin. It has a market cap of $41 billion.
Record Dividend Payout in Q4
On Feb 15, Devon announced that its board declared a fixed-plus-variable dividend of $1.00 per share based on the fourth-quarter performance which was a record high in the company's 50-year history.
It gives the stock a current yield of 6.5%.
The board also approved an increase in the fixed dividend, raising it 45%, or $0.05. After the fixed dividend is funded, up to 50% of the excess free cash flow each quarter is distributed to shareholders through the variable dividend.
The fourth quarter dividend payout of $1.00 will be paid on Mar 31, 2022 to shareholders of record at the close of business as of Mar 14, 2022. Therefore, since the deadline has passed, investors interested in Devon's big dividend payouts, will have to wait until the first quarter dividend to cash in.
Devon is also doing a share buyback program. In the fourth quarter, it repurchased 14 million shares at the cost of $589 million. The board expanded the share-repurchase authorization by 60% to $1.6 billion, or equivalent to 5% of Devon's market capitalization.
Another Beat in Q4
On Feb 15, Devon reported its fourth quarter results and beat the Zacks Consensus Estimate, reporting $1.39 versus the Zacks Consensus of $1.21.
It was the fourth earnings beat in a row.
Operating cash flow in the fourth quarter was $1.6 billion, a 173% increase year-over-year when the WPX merger closed. It resulted in $1.1 billion in free cash flow in the quarter.
For the year, Devon generated $2.9 billion of free cash flow, the highest in the company's 50-year history.
While much of the free cash flow went to shareholders, Devon also retired $1.2 billion of outstanding debt. As of Dec 31, 2021, the company had $2.3 billion of cash on hand and intends to retire low-premium debt of up to $1 billion in 2022 and 2023.
Analysts Raise Full Year Earnings Estimates
Devon reaffirmed its previously announced production plan in the range of 570,000 to 600,000 Boe per day for 2022, with an upstream capital investment of $1.9 billion to $2.2 billion.
But the analysts are bullish on what will happen with earnings in 2022, especially with crude still moving higher.
5 estimates were revised higher in the last 30 days pushing up the Zacks Consensus Estimate to $6.52 from $5.90 over the last 30 days.
This is 2022 earnings growth of 84.7% as the company only made $3.53 last year.
Shares Soar But Are Still Cheap
Energy was the best performing sector in 2021 and has started 2022 equally as hot. Devon is up 40% year-to-date.
But over the last 5 years, it still lags the S&P 500 with shares up just 44.7% compared to the SPY up 91.5%.
Shares are still cheap, with a forward P/E of just 9.5.
It also has a PEG of just 0.2. A PEG under 1.0 indicates that a company is both a value and has growth. That's a rare combination.
Devon will report first quarter 2022 earnings on May 2, 2022 after the market closes. Its conference call will be the next morning, on May 3, 2022.
For investors looking for a big dividend payout in the hottest sector on Wall Street, Devon Energy is one to keep on the short list.
Hyatt Hotels Corp. has seen a rebound in its leisure segment but business travel continues to lag. This Zacks Rank #5 (Strong Sell) is still not expected to be earnings positive in 2022.
Hyatt Hotels is a hospitality company with a portfolio that includes more than 1,150 hotel and all-inclusive properties in 70 countries across 6 continents. In 2021, Hyatt acquired the Apple Leisure Group, and its resort and hotel brands under the AMR Collection, including Secrets Resorts & Spas, Dreams, Breathless, Zoetry Wellness Spa Resorts, Alua, and Sunscape Resorts, in its largest acquisition in company history.
The company's offerings also includes the Park Hyatt, Miraval, Grand Hyatt, Alila, Andaz, The Unbound Collection by Hyatt, Destination by Hyatt, Hyatt Regency, Hyatt, Hyatt Ziva, Hyatt Zilara, Thompson HOtels, Hyatt Centric, Caption by Hyatt, JdV by Hyatt, Hyatt House, Hyatt Place, UrCove and Hyatt Residence Club brands.
Subsidiaries of the company also operate the World of Hyatt loyalty program, ALG Vacations, Unlimited Vacation Club, Amstar DMC destination management services and Trisept Solutions technology services.
A Miss in the Fourth Quarter
On Feb 16, Hyatt reported its fourth quarter earnings and missed badly. It reported a loss of $2.78 versus the consensus of a loss of just $0.12.
It has missed 3 out of the last 4 quarters.
There were some positives out of the quarter, however. Business continued to improve, as it had throughout the year.
Leisure Transient reached a record level in the fourth quarter at 102% of the 2019 level. But Business Transient was at just 44% of 2019 and Group was at 60%. However, both gained momentum throughout the year.
In 2021, systemwide RevPAR moved in the right direction. It was up 109% from Q1 to Q4. It rose to $97 from $46 during that time. RevPAR for the year rose 67% compared to 2020, which was hammered by the pandemic, to $77.80.
In the fourth quarter, Hyatt acquired Apple Leisure Group, which many know from its collection of all-inclusive resorts in Mexico and the Caribbean. The acquisition significantly expanded Hyatt's Leisure Transient business, adding 700 basis points.
Apple's AMR Collection hotels are expected to be fully bookable through Hyatt channels for the Americas in the summer of 2022, with Europe soon to follow.
Analysts Cut Full Year Estimates
The analysts got too bullish on Hyatt, however. Over the last 60 days, 6 estimates have been cut for 2022.
It has pushed the Zacks Consensus down to a loss of $0.06 from positive earnings of $0.73.
This is still a significant improvement compared to 2021 when Hyatt lost $5.24 per share.
A Pandemic Winner
The pandemic hit America 2 years ago this month. The hospitality industry was among those hardest hit by the shutdowns and other restrictions but investors quickly tagged the hotel chains as "winners" on the reopening.
Shares of Hyatt have rallied 76% over the last 2 years, but are still trailing the S&P 500 during that time, which gained 93%.
It still isn't even seeing positive earnings, despite the optimism about travel. Continued COVID outbreaks and restrictions globally continue to impact the travel industry.
Shares of Hyatt are down about 1% year-to-date.
Is the rebound in travel that is expected in 2022 already priced in?
Investors looking for a hotel stock may want to wait for a larger pullback in Hyatt and the return of positive earnings before diving in.
Additional content: Permian Oil Explorers in the Spotlight: 3 Stocks to Bet On
Oil prices have returned to glorious days. This is resulting in growth for the exploration and production businesses, in turn, leading the energy sector back to life.
Oil Price Surges
The price of West Texas Intermediate crude, trading at more than $110 per barrel, has improved drastically over the past year. The significant rise in oil price is owing to conflict and geopolitical muscle-flexing between Russia and Ukraine.
Oil prices are expected to remain in the bullish territory, and aid explorers and producers in adding rigs in the shale plays. In the Permian, the most prolific basin in the United States, the count of oil rigs in the week ended Mar 18 was 315, significantly higher than 292 in the week through Jan 7, 2022, per the weekly rig count report issued by Baker Hughes. The rotary rig count usually gets published in major newspapers and trade publications.
Baker Hughes' data, issued at the end of every week since 1944, helps energy service providers gauge the overall environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week figure indicate the demand trajectory for Baker Hughes' oilfield services from exploration and production companies.
EIA Expects Rise in US Shale Oil Production
In April, the total production of oil from shale resources in the United States will likely increase 117,000 barrels per day to 8,708 thousand barrels per day (MBbl/D), per the U.S. Energy Information Administration ("EIA"). The shale resources comprise Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian.
Of all the resources, Permian will witness the highest increase in daily oil production next month, according to EIA's drilling productivity report. In the Permian, EIA projects an oil production increase of 70,000 barrels per day to 5,208 MBbls/D for April.
Permian Explorers Set to Gain
Considering that Permian explorers are adding oil rigs and the region's production are likely to grow amid the favorable crude pricing scenario, it is high time to bet on the upstream players in the basin. Since selecting the right companies with a footprint in the Permian from the stock universe is not an easy task, we are employing our proprietary
to zero down on three prospective stocks. Stock Screener
Two companies currently sport a Zacks Rank #1 (Strong Buy), whereas one carries a Zacks Rank #2 (Buy). You can see
the complete list of today's Zacks #1 Rank stocks here . EOG Resources, Inc., a leading oil and natural gas exploration and production company, is well-placed to capitalize on the crude rally. Among the premium plays where EOG Resources is planning to allocate a significant amount of its capital spending is Delaware — a sub-basin of the broader Permian.
In 2022, EOG Resources, currently with a Zacks Rank #2, will remain focused to complete a significant number of wells. Notably, over the past 30 days, EOG has witnessed upward earnings per share estimate revisions for 2022.
Exxon Mobil Corp. will bank on its solid pipeline of lucrative projects in the Permian. ExxonMobil, with a Zacks Rank of 1, is expected to generate handsome returns from its low-cost operations in the basin.
In the Permian operation, XOM is planning to achieve net-zero greenhouse gas emissions by 2030. Notably, for 2022 and 2023, ExxonMobil has witnessed upward earnings estimate revisions over the past 30 days.
In the Permian,
Chevron Corp. is also a leading oil producer. Most analysts believe that Permian will continue to drive Chevron's production in the coming quarters. The low cost of operation is one of the benefits of CVX's operation in the Permian.
Chevron, with a Zacks Rank of 1, is likely to witness earnings growth of 57.4% in 2022. CVX has witnessed upward earnings estimate revisions for 2023 over the past 30 days.
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