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Chesapeake (CHK) Up 2.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Chesapeake Energy (CHK - Free Report) . Shares have added about 2.3% in that time frame, underperforming the S&P 500.

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

Chesapeake’s Earnings Top, Revenues Miss Estimates in Q2

Chesapeake Energy Corporation reported second-quarter 2018 earnings per share (excluding special items) of 15 cents, which beat the Zacks Consensus Estimate of 14 cents. The company had reported adjusted earnings of 18 cents in the prior-year quarter.
 
Total revenues amounted to $982 million, down from $1,279 million in the year-ago quarter. The top line also lagged the Zacks Consensus Estimate of $1,124 million.

The company’s second-quarter 2018 results declined due to higher operating costs, partially offset by higher oil equivalent price realizations.

Operational Performance

Chesapeake’s production in the reported quarter was approximately 48 million barrels of oil equivalent (MMBoe), unchanged year over year. Production comprised approximately 8 million barrels (MMbbls) of oil (flat year over year and up from the Zacks Consensus Estimate of 7.91 MMbbls), 210 billion cubic feet (bcf) of natural gas (up marginally but lagging the Zacks Consensus Estimate of 212 bcf) and 5 MMbbls of NGL (flat year over year and beating the Zacks Consensus Estimate of 4.82 MMbbls).

Oil equivalent realized price — including realized gains (losses) on derivatives —was $23.82 per barrel of oil equivalent compared with $22.42 in the year-ago quarter.

Total capital expenditure fell to $552 million from $620 million in the second quarter of 2017.

On the cost front, quarterly production expenses declined more than 2% year over year to $2.86 per Boe.

Expenses

Total second-quarter 2018 operating expense was $2,225 million, up 18.2% year over year.

Financials

At the end of the quarter, Chesapeake had cash balance of $3 million. Net long-term debt was $9,238 million.

Guidance

Chesapeake has lowered production guidance for 2018 to the range of 494,000-524,000 Boe per day from the previous range of 515,000-550,000 Boe per day. Moreover, the capital budget projection for 2018 is projected at $2,000-$2,300 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Chesapeake has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

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




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