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SM Energy (SM) Up 13.6% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for SM Energy Company (SM - Free Report) . Shares have added about 13.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is SM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

SM Energy’s first-quarter 2018 adjusted earnings of 7 cents per share beat the Zacks Consensus Estimate of 3 cents. However, the figure fell from the year-ago quarter’s earnings of 18 cents. Higher realized prices contributed to the growth. This was offset by higher expenses.

Total revenues skyrocketed more than 106% to $769.6 million in the prior-year quarter from $372.7 million. The top line beat the Zacks Consensus Estimate of $366 million.

Operational Performance

In the first quarter, production came in at 112.7 thousand barrels of oil equivalent per day (MBoe/d), down 16% from the year-ago quarter’s level of 134.4 MMBoe/d. The decline was mainly caused by reduced production in the Eagle Ford related to third party pipeline downtime.

SM Energy produced 280.2 million cubic feet per day (MMcf/d) of natural gas in the quarter, down 26% year over year. Oil production increased 21% year over year to 47.4 thousand barrels per day (MBbls/d). Natural gas liquids contributed 18.6 MBbls/d to the total volume, down 43% from the first quarter of 2017.   

Due to hedging, the average equivalent price per barrel of oil equivalent (Boe) was $35.34 compared with $27.55 in the year-ago quarter. Including hedging activities, average realized price of natural gas fell 3% year over year to $3.39 per thousand cubic feet (Mcf). Average realized prices of oil jumped 25% to $56.39 per barrel, whereas average realized prices of natural gas liquid inched up 1% to $19.44 per barrel.

On the cost front, unit lease operating expenses (LOE) increased 30% year over year to $4.95 per Boe. However, transportation expenses declined to $4.63 per Boe from $5.88 per Boe in the year-ago quarter. General and administrative expenses rose 15% to $2.73 per Boe from the prior-year quarter’s level of $2.38. Depletion, depreciation and amortization (DD&A) expenses were up 13% to $12.87 per Boe from the prior-year quarter’s level of $11.39.    

Liquidity

Net cash from operating activities increased to $140.1 million during the quarter from $134.9 million in the year-ago quarter. As of Mar 31, 2018, SM Energy had a cash balance of $643.3 million and long-term debt of $2,912.2 million. The company had a debt-to-capitalization ratio of 51.8%.

Operating Expenses

Operating expenses amounted to $310.5 million in the first quarter against $206.6 million in the year-ago quarter, up 50.3%. Exploration expenses increased to $13.7 million from $11.8 million in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to three lower.

SM Energy Company Price and Consensus

 

SM Energy Company Price and Consensus | SM Energy Company Quote

VGM Scores

At this time, SM has a subpar Growth Score of D, though it is lagging a bit on the momentum front with an F. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

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




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