About a month has gone by since the last earnings report for SM Energy Company (SM - Free Report) . Shares have lost about 10.4% 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 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.
Second-Quarter 2017 Results
SM Energy’s second-quarter 2017 adjusted earnings of 32 cents per share were in line with the Zacks Consensus Estimate. Meanwhile, the figure improved from the year-ago comparable quarter loss of 44 cents.
Total revenue decreased 64.7% to $120.7 million from $341.8 million in the prior-year quarter. Revenues also missed the Zacks Consensus Estimate by 2.3%.
Significantly low operating expenses were partially offset by lower oil and gas equivalent realized prices as well as lower production.
The company’s second-quarter production was at 124.6 thousand barrels of oil equivalent per day (MBoe/d), down 21% from the year-ago level of 157.2 MMBoe/d. The decrease is mainly attributed to the divestment of producing properties.
SM Energy produced 374.1 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 13% year over year. Oil production decreased 29% year over year to 32 thousand barrels per day (MBbls/d). Natural gas liquids contributed 30.3 MBbls/d to the total volume, down 26% from the second-quarter 2016.
Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $26.57 compared with $27.45 in the year-ago quarter. Including hedging activities, average realized price of natural gas increased 40% year over year to $3.63 per thousand cubic feet (Mcf). Average realized prices of oil fell 24% to $43.36 per barrel, whereas average realized prices of natural gas liquid grew 20% to $18.73 per barrel.
On the cost front, unit lease operating expenses (LOE) increased 24% year over year to $4.11 per Boe. Transportation expenses decreased to $5.71 per Boe from $5.95 per Boe in the year-ago period. General and administrative expenses rose 38% to $2.21 per Boe from the prior-year level of $1.60. Depletion, depreciation and amortization (DD&A) expenses were down 8% to $13.52 per Boe from the year-ago level of $14.75.
Net cash from operating activities decreased to $107.1 million during the quarter from $138.6 million in the year-ago quarter. As of Jun 30, SM Energy had a cash balance of $559.5 million and long-term debt of $2,901.948 million. The company had a debt-to-capitalization ratio of 53.7% compared with 52.6% in the preceding quarter.
Operating expenses amounted to $268.4 million in the second quarter as against $572.4 million in the year-ago quarter, down over 53%. Exploration expenses declined to $13.1 million from $13.2 million in the year-ago quarter.
SM Energy has raised its 2017 production estimate to 44.5-46.5 MMBoe from the earlier range of 41.5–44.5 MMBoe. Production for the third quarter is projected between 10.8–11.2 MMBoe. The company has maintained its 2017 capital expenditure budget at $875 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions higher for the current quarter compared to five lower. In the past month, the consensus estimate has shifted lower by 12.7% due to these changes.
SM Energy Company Price and Consensus
At this time, SM Energy's stock has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
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 expect in-line returns from the stock in the next few months.