On Jul 7, Penn Virginia Corporation (PVAC - Free Report) was upgraded to a Zacks Rank #1 (Strong Buy), implying that the stock will significantly outperform the broader U.S. equity market over the next one to three months.
Year to date, the stock has rallied 128.8%, outperforming the 9.5% collective increase of the stocks belonging to the industry.
Why the Upgrade?
Over the past 30 days, the Zacks Consensus Estimate for 2018 earnings per share has been revised upward from $8.91 to $10.16. The consensus estimate for 2019 earnings rose to $15.09 from $14.30 over the same period. This adds to the company’s already impressive earnings profile. Penn Virginia has surpassed the Zacks Consensus Estimate in all the prior four quarters, the average positive surprise being 18%.
We expect the company to record earnings growth of 252.8% and 48.5% in 2018 and 2019, respectively.
Penn Virginia is exclusively focused in the exploration and production of oil and natural gas in the prolific Eagle Ford shale. In the play, the company operates on roughly 83,100 acres of land with net 500 prospective drilling locations, helping it reach its target of driving production growth of 125% through 2018.
Almost 74% of the company’s production comprises crude oil. Hence, the ‘oilier’ nature of its volume mix positions it to benefit from strengthening oil prices. West Texas Intermediate (WTI) crude recently touched the $75-a-barrel psychological mark, reflecting more than 186% improvement from February 2016 when the commodity had hit its lowest level of $26.21 since 2003.
Moreover, Penn Virginia has strong cost-control initiatives in place. Through 2018, the company is planning to lower operating cost per barrel by 14%, further boosting profits.
Other Stocks to Consider
Other prospective players in the energy space include Continental Resources, Inc. (CLR - Free Report) , Murphy Oil Corporation (MUR - Free Report) and Marathon Oil Corporation (MRO - Free Report) . All these stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Continental Resources beat the Zacks Consensus Estimate for earnings in the last three quarters, the average positive surprise being 80.5%.
Murphy Oil surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters.
We expect Marathon Oil to witness year-over-year earnings growth of 336.8% in 2018.
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