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Encana (ECA) Down 13.1% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Encana Corporation . Shares have lost about 13.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Fourth-Quarter 2016 Results

Encana Corp.  reported operating earnings per share of $0.09, ahead of the Zacks Consensus Estimate of $0.03. The outperformance came on the back of successful cost containment efforts.

However, the bottom line slumped from the year-ago period profit of $0.13 per share amid sharply lower natural gas prices and volumes.

Quarterly revenues – at $822 million – came above the Zacks Consensus Estimate of $772 million but fell 20% from the prior-year figure of $1,031 million.
 
Production & Prices

In the fourth quarter, natural gas production declined approximately 19% year over year to 1,276 million cubic feet per day, while liquids production fell 25% year over year to 108.9 thousand barrels per day.

Encana's realized natural gas price were $2.35 per thousand cubic feet, down 31% from the year-ago quarter level of $3.43. Meanwhile, realized liquids price rose to $42.96 per barrel from $39.11 in the fourth quarter of 2015.

Costs & Expenses

Total operating expenses halved from the fourth quarter of 2015 to $876 million.

Encana reported operating costs of $152 million for the reported quarter, 11% lower than the year-ago quarter level. Meanwhile, transportation and processing expenses fell 38% to $186 million.

Cash Flows

Encana generated cash flows from operations of $302 million or 31 cents per share as against $383 million or $45 cents per share in the fourth quarter of 2015.

Capital Spending and Balance Sheet

Encana's capital investments during the quarter were $353 million. As of Dec 31, 2016, cash and cash equivalent was $834 million and long-term debt was $4,198 million. This represents a debt-to-capitalization ratio of 40.7%.

2017 Guidance

Encana has set $1.6-$1.8 billion as 2017 capital expenditure budget, while total production for the year is expected to be between 320 thousand barrels of oil equivalent per day and 330 thousand barrels of oil equivalent per day. The company expects total natural gas output in the 1,150–1,200 million cubic feet per day band. Liquids production is anticipated to range between 125 and 130 thousand barrels per day.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower. While looking back an additional 30 days, we can see even more downward momentum. There have been two downward revisions in the last two months. In the past month, the consensus estimate has shifted lower by 14.41% due to these changes.

Encana Corporation Price and Consensus

 

Encana Corporation Price and Consensus | Encana Corporation Quote

VGM Scores

At this time, Encana's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

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

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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