It has been about a month since the last earnings report for Comstock Resources (CRK - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Comstock due for a breakout? 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 drivers. <p><strong>Comstock Q2 Earnings Helped by Production Growth</strong></p><p style="text-align: justify;">Comstock Resources reported second-quarter 2018 loss of 78 cents per share (excluding one-time items), narrower than the Zacks Consensus Estimate of 79 cents and the year-ago quarter’s loss of $1.07. The impressive results were driven by growth in natural gas production.<br /><br />Quarterly revenues were $61.45 million, essentially unchanged from the year-ago quarter but lagged the Zacks Consensus Estimate of $62 million. The top line was primarily affected by lower average natural gas equivalent price realization.<br /><br /><strong>Volume Analysis</strong><br /><br />Comstock’s quarterly volume was 22.3 billion cubic feet equivalent (Bcfe), 18.5% higher than 18.8 Bcfe in the prior-year quarter. Natural gas output increased 25.4%, constituting 97.6% of the total production, whereas oil output plunged 63% year over year in the reported quarter, due to the divestment of South Texas Eagle Ford shale assets. The company’s successful Haynesville shale drilling program led to growth in natural gas production.<br /><br /><strong>Price Realizations</strong><br /><br />Average oil price realization was $57.56 per barrel compared with $45.34 in second-quarter 2017, reflecting an increase of 27%. Average natural gas realization was $2.59 per thousand cubic feet (Mcf) compared with $2.91 per Mcf in the year-earlier quarter, reflecting a decline of 11%. Average natural gas equivalent realization was $2.76 per thousand cubic feet (Mcfe) compared with $3.27 per Mcfe in the year-earlier quarter.<br /><br /><strong>Costs & Expenses</strong><br /><br />Total operating expenses increased 6% from second-quarter 2017 to $54.1 million, primarily reflecting the loss on sale of oil and gas properties of $6.8 million, along with 24.1% increase in gathering and transportation costs ($4.4 million). General and administrative costs also rose to $7 million in the reported quarter from $6.6 million in the year-ago period.<br /><br />These were partially offset by lease operating, production taxes and depreciation, as well as depletion and amortization expenses, all of which declined in the reported quarter.<br /><br /><strong>Cash Flow & EBITDAX</strong><br /><br />Comstock’s net cash provided from continuing operations was $65.4 million. This compared favorably with net cash provided by operating activities of about $52.3 million in the second quarter of 2017.<br /><br />EBITDAX from continuing operations increased marginally. The metric increased from $43.8 million in the year-ago period to $44 million.<br /><br /><strong>Capital Expenditure & Balance Sheet</strong><br /><br />In the reported quarter, Comstock’s capital expenditure fell to $43.4 million from $48.3 million in the year-ago quarter. The company spent $38.1 million on development drilling activities.<br /><br />As of Jun 30, 2018, the company had $158.4 million in cash and cash equivalents, and $1.2 billion in long-term debt. The company has plans to significantly lower its debt using the proceeds from a senior notes offering of $850 million, which was completed on Aug 3, and a credit facility that has a $700-million initial borrowing base.</p>
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -50% due to these changes.
At this time, Comstock has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Comstock has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.