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Why Is Concho Resources (CXO) Down 2.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Concho Resources (CXO - Free Report) . Shares have lost about 2.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Concho Resources due for a breakout? 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 catalysts.

Concho Posts Impressive Second-Quarter 2018 Results

Concho Resources 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.

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.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Concho Resources has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 growth based on our style scores.

Outlook

Concho Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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