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The competitive oil and gas industry and fluctuating oil and gas prices are posing challenges to the company. Amid the challenges and increased debt level, DVN’s management decided not to declare variable dividends for the fourth quarter and focused on the payment of fixed dividends and share buybacks.
Another stock from the same industry, EQT Corporation (EQT - Free Report) , registered a 14% increase in share price in the same time frame.
DVN Stock Price Performance (Six Months)
Image Source: Zacks Investment Research
Factors Acting in Favor of Devon Energy
Devon has a multi-basin portfolio and focuses on high-margin assets that hold significant long-term growth potential. Devon also has a diverse commodity mix, having a balanced exposure to oil, natural gas and natural gas liquids production volumes. The company continues to produce strong thanks to the contribution from its multi-basin assets.
The company continues to expand its operation in these basins through acquisitions. Devon completed the acquisition of Grayson Mill Energy, adding a high-margin production mix that enhances Devon’s position as one of the largest producers in the United States. This acquisition is expected to triple the total production volume to 150,000 barrels of oil equivalent per day (Boe/d) from 50,000 Boe/d earlier expected from Williston Basin.
The assets currently owned by Devon can sustain the production levels for more than 10 years. The ongoing exploration activities continue to replenish production volumes and add new reserves. Devon possesses assets that can deliver sustainable production for many years and provide reliable and affordable energy to its customers.
Devon continues to manage costs to boost margins. The company is also working to reduce its drilling and completion costs and is better aligning personnel with the go-forward business. Due to cost management, production costs, including taxes, averaged $11.39 per Boe in the third quarter of 2024, a decline of 7% from the prior period. The cost savings will continue to boost the margins of the company.
DVN’s Earnings Surprise History
Courtesy of the above factors, the company’s earnings in the last four reported quarters were better than estimates. Devon reported an average positive earnings surprise of 4.99% in the last four quarters.
Image Source: Zacks Investment Research
Devon Stock Returns Better Than Industry
Devon’s return on equity (ROE) has outperformed the industry average in the trailing 12 months. ROE of DVN was 24.73% compared with the industry average of 15.81%. The company has been investing shareholders funds effectively in profitable projects compared to its peers in the industry, which is evident from its ROE.
Image Source: Zacks Investment Research
Devon’s Shares Are Trading at a Discount
Devon’s shares are inexpensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 3.85X compared with its industry average of 6.58X.
Image Source: Zacks Investment Research
Devon’s Earnings Estimates Decline
The Zacks Consensus Estimate for Devon’s 2024 and 2025 earnings per share has decreased 4.57% and 11.99%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
To Sum Up
Devon Energy continues to have a very strong portfolio of high-quality assets. The contribution from its multi-basin assets generates free cash flow and assists the company in strengthening its balance sheet. Devon Energy has a balanced exposure to oil, natural gas and NGL production adds to its advantage.
Despite a negative revision in earnings estimates and a dip in the share prices, investors can consider adding the stock to their portfolio as it currently has a VGM Score of A and is trading at a discount. The strong ROE and VGM Score indicates a robust performance.
Those who already own this Zacks Rank #3 (Hold) stock would do well retaining it in their portfolio.
Image: Bigstock
Devon Declines 32.2% in Six Months: Should You Bet on the Stock?
Devon Energy Corporation’s (DVN - Free Report) shares have declined 32.2% in the last six months compared with the 0.2% decline in the Zacks Oil and Gas – Exploration and Production - United States industry. The broader Zacks Oil and Energy sector has lost 12.8% and the Zacks S&P 500 composite has rallied 8.3% in the same time frame.
The competitive oil and gas industry and fluctuating oil and gas prices are posing challenges to the company. Amid the challenges and increased debt level, DVN’s management decided not to declare variable dividends for the fourth quarter and focused on the payment of fixed dividends and share buybacks.
Another stock from the same industry, EQT Corporation (EQT - Free Report) , registered a 14% increase in share price in the same time frame.
DVN Stock Price Performance (Six Months)
Image Source: Zacks Investment Research
Factors Acting in Favor of Devon Energy
Devon has a multi-basin portfolio and focuses on high-margin assets that hold significant long-term growth potential. Devon also has a diverse commodity mix, having a balanced exposure to oil, natural gas and natural gas liquids production volumes. The company continues to produce strong thanks to the contribution from its multi-basin assets.
The company continues to expand its operation in these basins through acquisitions. Devon completed the acquisition of Grayson Mill Energy, adding a high-margin production mix that enhances Devon’s position as one of the largest producers in the United States. This acquisition is expected to triple the total production volume to 150,000 barrels of oil equivalent per day (Boe/d) from 50,000 Boe/d earlier expected from Williston Basin.
The assets currently owned by Devon can sustain the production levels for more than 10 years. The ongoing exploration activities continue to replenish production volumes and add new reserves. Devon possesses assets that can deliver sustainable production for many years and provide reliable and affordable energy to its customers.
Devon continues to manage costs to boost margins. The company is also working to reduce its drilling and completion costs and is better aligning personnel with the go-forward business. Due to cost management, production costs, including taxes, averaged $11.39 per Boe in the third quarter of 2024, a decline of 7% from the prior period. The cost savings will continue to boost the margins of the company.
DVN’s Earnings Surprise History
Courtesy of the above factors, the company’s earnings in the last four reported quarters were better than estimates. Devon reported an average positive earnings surprise of 4.99% in the last four quarters.
Image Source: Zacks Investment Research
Devon Stock Returns Better Than Industry
Devon’s return on equity (ROE) has outperformed the industry average in the trailing 12 months. ROE of DVN was 24.73% compared with the industry average of 15.81%. The company has been investing shareholders funds effectively in profitable projects compared to its peers in the industry, which is evident from its ROE.
Image Source: Zacks Investment Research
Devon’s Shares Are Trading at a Discount
Devon’s shares are inexpensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 3.85X compared with its industry average of 6.58X.
Image Source: Zacks Investment Research
Devon’s Earnings Estimates Decline
The Zacks Consensus Estimate for Devon’s 2024 and 2025 earnings per share has decreased 4.57% and 11.99%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
To Sum Up
Devon Energy continues to have a very strong portfolio of high-quality assets. The contribution from its multi-basin assets generates free cash flow and assists the company in strengthening its balance sheet. Devon Energy has a balanced exposure to oil, natural gas and NGL production adds to its advantage.
Despite a negative revision in earnings estimates and a dip in the share prices, investors can consider adding the stock to their portfolio as it currently has a VGM Score of A and is trading at a discount. The strong ROE and VGM Score indicates a robust performance.
Those who already own this Zacks Rank #3 (Hold) stock would do well retaining it in their portfolio.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.