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Why Is Chesapeake Energy (CHK) Down 16.5% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Chesapeake Energy Corporation (CHK - Free Report) . Shares have lost about 16.5% 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 drivers.

Second-Quarter 2017 Results

Chesapeake Energy Corporation reported strong second-quarter 2017 results on the back of higher oil equivalent price realizations and lower operating costs.

Earnings per share (excluding special items) of $0.18 beat the Zacks Consensus Estimate of $0.14. The company had reported adjusted loss per share of $0.16 in the prior-year quarter.

Total revenue increased to $1,279 million from $440 million a year ago. The top line also beat the Zacks Consensus Estimate of $1,072 million.

Operational Performance

Chesapeake’s production in the reported quarter was approximately 48 million barrels of oil equivalent (MMBoe), reflecting a year-over-year decrease of 20%. Production consisted of approximately 8 million barrels (MMbbls) of oil (flat year over year), 209 billion cubic feet (bcf) of natural gas (down 22.3% year over year) and 5 MMbbls of NGL (down almost 29% year over year).

Oil equivalent realized price – including realized gains (losses) on derivatives – in the reported quarter was $22.42 per barrel of oil equivalent, compared with $16.43 a year ago.

Total capital expenditure increased to $620 million from $393 million in the second quarter of 2016.

On the cost front, quarterly production expenses decreased more than 4% year over year to $2.92 per Boe.

Expenses

Total second-quarter 2017 operating expense was $1,882 million, down almost 45% year over year.

Financials

At the end of the quarter, Chesapeake had cash balance of $13 million. Net long-term debt was $9,850 million.

Guidance

Chesapeake has maintained the prior projection and expects 2017 production in the range of 541,000–562,000 Boe per day. Moreover, the company retained the 2017 capital spending projection in the $2,100–$2,500 million band.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to four lower. While looking back an additional 30 days, we can see even more downward momentum.

VGM Scores

At this time, Chesapeake Energy's stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with C. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth investors than momentum and value investors.

Outlook

While estimates have been broadly trending downward for the stock, the magnitude of these revisions has been net zero. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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