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Here's Why Hold Strategy is Apt for EQT Stock Right Now

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We issued an updated research report on energy player EQT Corporation (EQT - Free Report) on Aug 23. The company’s strong focus on natural gas rich Utica and Marcellus shale plays will create long-term value for stockholders. However, rising processing costs are a concern.

The company currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.

In a landmark deal signed in June 2017, EQT decided to acquire Rice Energy for a total consideration of $6.7 billion. On completion of the deal, the upstream companies will create the largest natural gas producer in the United States. Most importantly, the acquisition will significantly raise EQT’s core acreage positions in the Marcellus and Utica shale plays.

Moreover, we appreciate EQT’s strong financials as reflected by its improving net cash flow from operations since the beginning of this year. Long-term debt also plunged during the first half of 2017, reflecting its strong balance sheet.  

EQT’s earnings surprise history is encouraging as well. The company managed to beat the Zacks Consensus Estimate in three of the last four quarters with an average positive earnings surprise of 102.17%. Also, we expect the company to witness year-over-year earnings growth of 397.6%.

However, during first-half 2017, EQT’s operating expenses related to transportation and processing activities rose more than 66%. If the trend continues, the company’s revenues might get affected.

Also, EQT lacks geographical diversification as its resources are concentrated in the Appalachian Basin. This increases the risk exposure of the company as any disruption in the region will affect financials.

Moreover, the company’s pricing chart shows weakness. Over the past year, EQT stock – belonging to the Zacks U.S. Oil Exploration industry – fell almost 15%.

Stocks to Consider

A few better-ranked players in the energy sector are TransCanada Corporation (TRP - Free Report) and Range Resources Corporation (RRC - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Headquartered in Calgary, Canada, TransCanada is a midstream energy firm in North America. The company posted an average positive earnings surprise of 4.06% over the last four quarters.

Based in Fort Worth, TX, Range Resources is an independent oil and gas company, engaged in the exploration, development and acquisition of U.S. oil and gas resources. The company’s 2017 earnings are estimated to grow 116.5%.

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