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Why Is SM Energy (SM) Up 13.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for SM Energy (SM - Free Report) . Shares have added about 13.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is SM Energy 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 drivers.

SM Energy Beats on Q2 Earnings Estimates

SM Energy’s second-quarter adjusted earnings of $2.19 per share beat the Zacks Consensus Estimate of $2.12. The bottom line improved from the year-ago earnings of 1 cent per share.

Total quarterly revenues of $992 million increased from $564 million in the year-ago quarter and beat the Zacks Consensus Estimate of $842 million.

The strong quarterly results were driven by higher oil-equivalent production volumes and commodity price realizations.

Operational Performance:

Production

SM Energy’s second-quarter production totaled 146.6 thousand barrels of oil equivalent per day (MBoe/d) (46% oil), up 7.4% from the year-ago level of 136.5 MBoe/d. Solid performance from several Midland Basin wells contributed to the performance.

Oil production of SM Energy declined 8% year over year to 67.5 thousand barrels per day (MBbls/d). The company produced 346.3 million cubic feet per day of natural gas in the quarter, up 19% year over year. Natural gas liquids contributed 21.4 MBbls/d to the total production volume, up 46.6%.

Realized Prices

Before the effects of derivative settlements, the average realized price per Boe was $74.23 compared with $45.28 in the year-ago quarter. The average realized price of natural gas surged 129.3% year over year to $7.66 per thousand cubic feet. Also, average realized oil prices increased 66.3% to $108.64 per barrel, and that of natural gas liquids grew 48.1% to $42.08 per barrel.

Costs & Expenses

On the cost front, unit lease operating expenses of SM Energy increased 10.6% year over year to $5.11 per Boe. General and administrative expenses increased 7.1% to $2.12 per Boe from the prior year's $1.98. Yet, transportation expenses fell to $2.87 per Boe from $3.01.

Total hydrocarbon production expenses of SM Energy in the quarter were $165.6 million compared with the year-ago level of $125.5 million. Total exploration expenses were $20.9 million, higher than the year-ago figure of $8.7 million.

Total operating expenses in the second quarter declined to $479.3 million from the year-ago period’s $744.5 million.

Capex

The capital expenditure of SM Energy in the June-end quarter was $215.6 million. It generated a free cash flow of $276.6 million in the reported quarter.

Balance Sheet

As of Jun 30, 2022, SM Energy had cash and cash equivalents of $267.1 million. It had net debt of $1,318.1 million at the second-quarter end.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, SM Energy has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, SM Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

SM Energy is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, CNX Resources Corporation. (CNX - Free Report) , a stock from the same industry, has gained 9.8%. The company reported its results for the quarter ended June 2022 more than a month ago.

CNX Resources Corporation. reported revenues of $473 million in the last reported quarter, representing a year-over-year change of +31.8%. EPS of $0.61 for the same period compares with $0.18 a year ago.

For the current quarter, CNX Resources Corporation. is expected to post earnings of $0.74 per share, indicating no change from the year-ago quarter. The Zacks Consensus Estimate has changed +2.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for CNX Resources Corporation. Also, the stock has a VGM Score of B.


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