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Cabot Oil & Gas (COG) Down 4.6% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Cabot Oil & Gas Corporation (COG - Free Report) . Shares have lost about 4.6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is COG 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.

First-Quarter 2018 Results

Cabot reported first-quarter 2018 earnings per share — adjusted for special items — of 28 cents, surpassing the Zacks Consensus Estimate of 26 cents. Moreover, the figure compared favorably with earnings of 19 cents in the year-earlier quarter. The result was favored by better than expected volumes and lower expenses.

The company’s quarterly revenues of $473.2 million outpaced the Zacks Consensus Estimate of $463 million. However, the reported figure was below the prior-year quarter’s revenues of $517.8 million, primarily due to lower gas prices

Volume Analysis

In the quarter under review, Cabot’s overall production totaled 169.6 billion cubic feet equivalent (Bcfe) — 97.1% gas — marginally lower than the prior-year quarter volume of 170.1 Bcfe. Natural gas output was 164.6 Bcf, slightly higher than 163.8 Bcf in the previous year. Liquids production came in at 829.1 thousand barrels (MBbl) lower than year-ago quarter’s 1,044.5 MBbl. Notably, production at all three categories surpassed the company’s first-quarter guidance.

Net production from the company’s Marcellus Shale in the first quarter totaled at 1,822 million cubic feet (Mmcf) per day. At present, the company has three rigs and two completion crews operating in the prolific Marcellus Shale.

Realized Prices

The average realized natural gas price fell to $2.44 from the year-ago quarter to $2.64 per thousand cubic feet. The metric missed our expectation of $2.50 per Mcf.  Meanwhile, average crude/condensate price realization rose to $63.61 per barrel from $46.73 per barrel. This metric surpassed the Zacks Consensus Estimate of $56 per barrel. Natural gas liquids fetched $23.75 per barrel as against $20.71 a year back.

Costs & Expenses

Total operating expenses came in at 22.1% lower than the first quarter of 2017, declining to $254.1 million. While transportation and gathering costs were down 9.2% year over year to $112.1 million, depreciation, depletion and amortization expenses decreased 39.2% from the year-ago period to $82.1 million.

Drilling Statistics, Capital Expenditures & Balance Sheet

Cabot drilled 15 net wells and completed 11 during the quarter. While operating cash flows were $272.8 million (up 1.3% year over year), capital expenditures totaled $156.3 million (down 25%). As of Mar 31, 2018, the company had cash and cash equivalents of $ 964.9 million and long-term debt (including current portion) of $1,522.2 million, with a debt-to-capitalization ratio of 38.7%.

Share Repurchase Program

Through the first quarter, the company bought back 8.3 million shares, at a weighted average share price of $24.85.

Guidance

For the second quarter, Cabot Oil and Gas expects net production to be in the range of 1,850-1,900 million cubic feet equivalent a day.

For 2018, the company reiterated its daily production growth guidance of 10-15%. It plans has a capital budget of $950 million for the year.

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.

Cabot Oil & Gas Corporation Price and Consensus

VGM Scores

At this time, COG has a great Growth Score of A, though it is lagging a lot on the momentum front with a D. Charting a somewhat similar path, 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.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

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




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