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Hess (HES) Up 6.4% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Hess Corporation (HES - Free Report) . Shares have added about 6.4% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is HES due for a pullback? 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.

First-Quarter Results

Hess Corporation reported adjusted first-quarter 2018 loss from continuing operations of 27 cents per share, narrower than the Zacks Consensus Estimate of a loss of 54 cents and the year-ago quarter loss of $1.07.

Revenues increased to $1,390 million in the quarter from $1,254 million a year ago. The top line also surpassed the Zacks Consensus Estimate of $1,150 million.

Higher realized oil and natural gas prices, rise in throughput volumes and the plunge in operating expenses supported the first-quarter numbers. The results were however partially offset by lower oil equivalent production.

Through first-quarter 2018, Hess spent roughly $380 million for buying back 8 million shares. The energy player also announced that it has boosted the buyback program to $1.5 billion, reflecting an increase of $1 billion.

Q1 Operational Update

Exploration and Production:In the quarter under review, the Exploration and Production business incurred a loss of $25 million, way narrower than the year-earlier loss of $233 million.

Quarterly hydrocarbon production was 255 thousand barrels of oil equivalent per day, down 18% year over year owing to unscheduled downtime at Gulf of Mexico’s Enchilada platform.

Crude oil production was 131 thousand barrels per day compared with 175 thousand barrels in the year-ago quarter. Natural gas liquids production totaled 37 thousand barrels per day compared with 40 thousand barrels in the prior-year quarter. Natural gas output was 504 thousand cubic feet (Mcf) per day versus 484 Mcf a year ago.    

Worldwide crude oil realization per barrel of $59.32 (including the impact of hedging) showed an increase of 22% year over year.

Worldwide natural gas prices rose 20.6% year over year to $3.86 per Mcf. The average worldwide natural gas liquids selling price also increased to $21.11 per barrel from $18.71 in the year-ago quarter.

Midstream: From this business, the company generated profits of $28 million, significantly higher than $18 million in the January-to-March quarter of 2017. Rise in throughput volumes primarily contributed to the segment’s profits.

Operating Expenses

Operating expenses in the first quarter totaled $288 million, down more than 19% from the year-ago $358 million.

Financials

Quarterly net cash flow from operations was $210 million at the end of the first quarter. Hess’ capital and exploratory expenditures totaled $384 million, down 2.3% from $393 million in the prior-year quarter.

As of Mar 31, 2018, the company had approximately $3,726 million in cash and $6,397 million in long-term debt. The debt-to-capitalization ratio at the end of the quarter was 35.5%.  

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to four lower. Last month, the consensus estimate has shifted by 24.2% due to these changes.

Hess Corporation Price and Consensus

 

VGM Scores

At this time, HES has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions looks promising. Notably, HES has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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