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Concho (CXO) Q2 Earnings Beat on Price and Volume Gain

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Concho Resources Inc. (CXO - Free Report) reported strong second-quarter 2018 revenues and earnings on the back of higher commodity-price realizations and robust production growth.

The company reported adjusted net earnings per share of $1.24, comfortably beating the Zacks Consensus Estimate of 92 cents. The bottom line also improved significantly from the prior-year quarter’s adjusted income of 52 cents per share.

Concho’s total operating revenues in the second quarter came in at $945 million, increasing substantially from $567 million a year ago. The top line also surpassed the Zacks Consensus Estimate of $861 million.

Operating revenues from oil sales recorded a year-over-year increase of 72.4% to $795 million while gas revenues increased 41.5% from the prior-year quarter to $150 million.

Concho Resources Inc. Price, Consensus and EPS Surprise

Concho Resources Inc. Price, Consensus and EPS Surprise | Concho Resources Inc. Quote

Volume Analysis

Concho's average quarterly volume increased 24% year over year to 228.9 thousand barrels of oil equivalent per day (MBoe/d), within the company’s guidance range. Of the volume, 62.5% consisted of liquids. Daily oil output was up 26.5% to 143.2 thousand barrels while natural gas production was 514.7 million cubic feet (up 20%).

Realized Prices

The average realized natural gas price jumped about 17.7% from the year-ago quarter to $3.19 per thousand cubic feet while average oil-price realization increased 36.3% to $60.98 per barrel. Overall, the company fetched $45.31 per barrel compared with $33.73 a year ago.

Financial Position

As of Jun 30, Concho had cash and cash equivalents of $55 million. The company had long-term debt of $2,371 million, representing a debt-to-capitalization ratio of 19.3%, recording a marginal decline from the leverage of 19.6% as of Mar 31.

Updated Outlook

Taking into account the acquisition of RSP Permian, Inc., which got closed on Jul 19, 2018, Concho updated its full-year 2018 guidance. It expects production to average 260-263 MBoe/d in 2018. Notably, third-quarter output levels are expected between 280 MBoe/d and 285 MBoe/d. The company expects capex in the band of $2.5-$2.6 billion versus prior guidance of $2 billion. The increased capital expenditure budget reflects the company’s intention to drill several development projects in the second half of 2018.

Zacks Rank and Key Picks

Concho currently carries a Zacks Rank 3 (Hold).

Some better-ranked players in the energy space are China Petroleum and Chemical Corporation (SNP - Free Report) , also known as Sinopec, PetroChina Company Limited (PTR - Free Report) , and Bonanza Creek Energy, Inc. (BCEI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sinopec delivered an average positive earnings surprise of 492.8% in the trailing four quarters.

PetroChina delivered an average positive earnings surprise of 21.99% in the trailing four quarters.

Bonanza Creek surpassed earnings estimates in each of the trailing four quarters, delivering an average positive earnings surprise of 215.16%

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