On Mar 27, Stone Energy Corporation was raised to a Zacks Rank #2 (Buy).
Why the Upgrade?
For first-quarter 2018, the Zacks Consensus Estimate for earnings per share has been revised upward from 38 cents to 39 cents over the last 60 days. The consensus mark for current-year earnings was raised to $1.78 from $1.43.
The company’s free cashflow for 2017 was recorded at $535 million against negative free cashflow of $161 million in 2016. Partial recovery in crude prices primarily supported the massive improvement. Hence, Stone Energy generated sufficient operating cashflow during 2017 for financing its capital budget.
Stone Energy has negligible current debt as its long-term debt contracted 33.2% through 2017. Moreover, cash balances surged 48.1% last year, reflecting considerable balance sheet strength. The company’s pricing chart looks impressive. Over the past year, the stock has rallied 68.9%, outperforming the industry’s 10.4% decline.
We appreciate the company’s strong foothold in the Gulf of Mexico — which offers abundant crude reserves. With innumerable discoveries of oil fields in the Gulf regions, the company estimated total Gulf reserves of more than 50 billion barrels. The company’s allocation of 36% capital budget for 2018 toward exploration activities in the prospective oil and gas resources is highly positive especially when crude prices recovered from historical lows touched during early 2016. The price of West Texas Intermediate crude recently crossed the $65-per-barrel mark, way higher than historical low-mark of $26.21 per barrel in February 2016.
Other Stocks to Consider
Other prospective players in the energy space include W&T Offshore, Inc. (WTI - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and Concho Resources Inc. (CXO - Free Report) . All 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 Houston, TX, W&T Offshore is primarily an upstream energy player. It is expected to witness year-over-year earnings growth of 3.6% in 2018.
Headquartered in Irving, TX, Pioneer Natural Resources is an upstream energy firm. It has an average positive earnings surprise of 66.9% for the last four quarters.
Headquartered in Midland, TX, Concho is also an upstream energy company. It will likely see a year-over-year surge of 73.2% in 2018 earnings.
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