On Jun 16, Devon Energy Corporation (DVN - Free Report) was upgraded to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The Zacks Consensus Estimate for 2018 earnings per share has been revised upward from $1.39 to $1.64 over the last 30 days. The Zacks Consensus Estimate for 2019 earnings rose to $3.05 from $2.47. Moreover, we expect the company to record earnings growth of 160.3% and 86.3% in 2018 and 2019, respectively.
Devon has a strong footprint in oil-rich U.S. resources comprising Eagle Ford, Delaware Basin (the sub-basin of Permian), Rockies and the STACK play. Moreover, the company has exposure to Eastern Alberta’s heavy oil projects. Apart from oil, Devon’s strong exposure to prolific natural gas fields like Barnett Shale will secure the company’s long-term production growth.
In fact, from the U.S. resources, the company is expecting oil production to grow from 114 thousand barrels per day (MBbls/D) in 2017 to more than 175 MBbls/D through 2020. A major portion of the output growth is likely to be backed by Delaware and STACK plays. Devon is also planning to lower cash cost per barrel of oil equivalent by 15% from 2017 to 2020.
The overall production growth and strong cost-saving initiatives are likely to help Devon to witness compound annual growth rate (CAGR) of more than 25% in cash flow through 2020. This will lead to $2.5 billion in cumulative free cashflow generation over the same time frame, assuming that West Texas Intermediate (WTI) oil will continue to trade over $60 per barrel.
All these positive developments indicate the company’s impressive pricing chart. Over the past year, the stock has rallied 31.9%, outperforming the 14.5% cumulative rise of the stocks belonging to the industry.
Other Stocks to Consider
Other prospective players in the energy space are Anadarko Petroleum Corp. (APC - Free Report) , Eclipse Resources Corp. (ECR - Free Report) and Wildhorse Resource Development Corp. (WRD - Free Report) . While Anadarko carries a Zacks Rank #2 (Buy), Eclipse and Wildhorse sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
We expect Anadarko Petroleum to witness year-over-year earnings growth of 229.6% in 2018.
Eclipse is expected to record revenue growth of 13.5% through 2018.
Wildhorse will likely see year-over-year earnings growth of 309.3% in 2018.
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