It has been about a month since the last earnings report for Range Resources (RRC - Free Report) . Shares have added about 4.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Range Resources 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.
Record Production Enables Range Resources to Beat Q2 Earnings
Range Resources Corporation recently reported second-quarter 2018 earnings (adjusted for one-time items) of 20 cents per share, beating the Zacks Consensus Estimate of 10 cents. The bottom line was up 233% from the year-ago figure of 6 cents.
The strong second-quarter 2018 earnings were boosted by an increase in oil and gas equivalent production, and price realizations, partially offset by higher expenses.
Total revenues of $656.2 million, however, missed the Zacks Consensus Estimate of $661 million. Moreover, the top line declined 2.5% year over year from $673.1 million in the prior-year quarter. The fall in revenues was due to lower realized prices of natural gas, which accounts for the majority of Range Resources’ production.
Following the earnings release, the stock jumped 6.6%.
During the second quarter, the company’s production touched a record level of around 2,200.3 million cubic feet equivalent per day (MMcfe/d). Natural gas made up 68% of the total production, while natural gas liquids (NGLs) and oil accounted for the remaining 32%.
Total production improved 13% from the year-ago quarter and also surpassed the Zacks Consensus Estimate of 2,183MMcfe/d, primarily due to improvement in the Appalachia division, partially offset by a decline in North Louisiana output.
On a year-over-year basis, oil production increased 15%, while NGL production rose 11%. Moreover, natural gas production jumped 14% year over year.
The company’s total price realization (including the effects of hedges and derivative settlements) averaged $1.88 per thousand cubic feet equivalent (Mcfe), up 5% from the prior-year quarter. Of this, NGL prices surged 51% to $10.41 per barrel while crude oil prices rose 8% to $52.95 per barrel, both on a year-over-year basis. However, natural gas prices were down 9% year over year to $1.58 per Mcf.
Direct operating costs in the second quarter was $34.5 million, increasing 11.8% from the year-ago quarter. Total expenses were $764.5 million, up 40% year over year.
At the end of the quarter, the company had a total debt of approximately $4,207.2 million, with a debt-to-capitalization ratio of 42.2%. The company’s expenditure totaled $260 million in the second quarter for drilling and completion of 27.3 net wells.
For the third quarter of 2018, the company estimates production at about 2.2 Bcfe per day. Given this, the annual output is likely to rise 11%.
The upstream energy player reiterated its 2018 capital budget of $941 million. The budget will be funded by the company’s cash flow.
For the second half of the year the company expects pre-hedge NGL realization to remain at the high end of the guidance.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, Range Resources has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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 style scores.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Range Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.