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Comstock (CRK) Down 13.5% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Comstock Resources, Inc. (CRK - Free Report) . Shares have lost about 13.5% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Comstock Reports Narrower-than-Expected Loss in Q1

Comstock Resources reported first-quarter 2017 loss of $1.75 per share (excluding one-time items), narrower than the Zacks Consensus Estimate of a loss of $1.86. The better-than-expected results were driven by improved oil and gas prices, increased revenues and reduced operating expenses. In particular, oil and natural gas prices moved up 84% and 60%, respectively, compared to the year-ago quarter providing an impetus to the finances of the company. Further, Comstock’s quarterly loss significantly narrowed from the year-ago adjusted loss of $5.60 per share.

Quarterly revenues increased to $53.8 million from $37 million a year ago. The higher realized prices and the higher natural gas production resulted in improved oil and gas sales in the quarter. While natural gas sales jumped 62.8% to $40.9 million, oil sales increased 16.7% to $ 12.8 million. However, revenues were below the Zacks Consensus Estimate of $58 million owing to a decline in production.

Volume Analysis

Comstock’s quarterly volume was 15.6 billion cubic feet equivalent (Bcfe), compared with 16.3 Bcfe in the prior-year quarter. Natural gas output – constituting 90% of total production – increased 1.2% whereas oil output plunged 36.4% in the reported quarter. Growth in natural gas production is attributable to the company's successful Haynesville shale drilling program. However, the decline in oil production was due to the lack of drilling in the company's South Texas Eagle Ford shale properties.

Price Realizations

Average oil price realization (before hedging) was $48.6 per barrel, compared with $26.44 in the first quarter of 2016. Average natural gas realization was $2.92 per thousand cubic feet/Mcf compared with $1.82 per Mcf in the year-earlier quarter.

Costs & Expenses

Total operating expenses were down 45% from the first quarter of 2016 to $51.4 million.

Gathering and transportation costs were $4.1 million, down 5.4% from the year-ago quarter. Lease operating cost of $9.9 million witnessed 23.7% year-over-year decline. Depreciation charges were down by 23% to $29.9 million in the reported quarter. Further, total expenses in the quarter did not include impairment and exploration charges which were incurred in the year-ago quarter.

Cash Flow & EBITDAX

Comstock’s operating cash inflow from continuing operations were $15.9 million. This compared favorably with the operating cash outflow of about $14 million in the first quarter of 2016.  

EBITDAX from continuing operations increased significantly. The metric surged 133% year over year to $34.2 million.

Capital Expenditure & Balance Sheet

In the reported quarter, Comstock’s capital expenditure amounted $38.3 million. The company spent $35.7 million on development drilling activities. This marks a 401% growth from $7.1 million spent a year ago.

As of Mar 31, 2017, the company had $30.4 million in cash and cash equivalents and $1,051.4 million in long-term debt.

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.

Comstock Resources, Inc. Price and Consensus

 

VGM Scores

At this time, the stock has a subpar Growth Score of 'D', though it is lagging a bit on the momentum front with an 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% 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 value 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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