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Lonestar Raised to Strong Buy on Bright Output Prospects

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On Aug 22, upstream energy player Lonestar Resources US, Inc. (LONE - Free Report) was raised to a Zacks Rank #1 (Strong Buy). Companies sporting a Zacks Rank of 1 have strong chances of outperforming the broader market over the next one to three months.

Why the Upgrade?

Lonestar has strong focus on the Eagle Ford Shale play where it is planning to allocate most of its 2017 capital budget. The cost of production in the oil-rich Eagle Ford is low as compared to many other resources. Hence, it is economical for Lonestar to carry on exploration and production activities amid weak crude pricing environment. 

Since 2017, the upstream firm has been generating lucrative cash flow. In fact, during the first half of this year, the company’s net cash flow for operations has increased almost 40%. 

Investors should also note that the company has many prospective drilling locations in the Eagle Ford Shale play which could fuel production growth. As of Dec 31, 2016, Lonestar has identified 141 gross drilling locations in the Eagle Ford Shale play. In fact, for third-quarter 2017, the company projects production in the range of 7,600-8,100 barrels of oil equivalent per day (BOE/D), reflecting a 35% to 44% rise from the prior quarter. 

During April to June 2017, the company – belonging to the Zacks U.S Exploration & Production industry – reported narrower-than-expected loss. Moreover, second-quarter adjusted loss of 6 cents was much narrower than the year-ago quarter’s loss of 26 cents. Also, over the last 30 days, the Zacks Consensus Estimate for Lonestar’s 2017 bottom line has been revised to a loss of 62 cents, much narrower than the earlier projection of a loss of 86 cents. 

Other Stocks to Consider

A few other energy stocks worth considering are TransCanada Corporation (TRP - Free Report) , Transmontaigne Partners LP (TLP - 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.

Transmontaigne - headquartered in Denver, CO - is involved in the transportation and storing of refined petroleum products. The firm posted an average positive earnings surprise of 6.60% 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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