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Hess (HES) Down 5.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Hess (HES - Free Report) . Shares have lost about 5.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hess 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 catalysts.

Hess Q3 Earnings and Revenue Beats Estimates

Hess Corporation reported adjusted third-quarter 2018 income from continuing operations of 38 cents per share, which beat the Zacks Consensus Estimate of a loss of 5 cents. The company reported a loss of $1.07 in the year-ago quarter.

Revenues increased 11.2% to $1,828 million from $1,644 million in the year-ago quarter. The top line beat the Zacks Consensus Estimate of $1,555 million.
 
Higher realized oil and natural gas prices along with plunge in operating expenses boosted third-quarter results. This was partially offset by lower production.

Q3 Operational Performance

In the reported quarter, the company’s Exploration and Production (E&P) business posted income of $144 million, against a loss of $474 million in the prior-year quarter.

Quarterly hydrocarbon production totaled 297 thousand barrels of oil equivalent per day (MBOE/d), which declined 4.5% year over year but beat the Zacks Consensus Estimate of 266 MBOE/d.

Crude oil production was 155 thousand barrels per day compared with 176 thousand barrels per day in the year-ago quarter. The figure beat the Zacks Consensus Estimate of 135 thousand barrels per day. Natural gas liquids production totaled 40 thousand barrels compared with 43 thousand barrels in the prior-year quarter. The figure beat the Zacks Consensus Estimate of 39.74 thousand barrels. Natural gas output was 611 thousand cubic feet (Mcf) compared with 552Mcf in the prior-year quarter. The figure beat the Zacks Consensus Estimate of 531Mcf.

Worldwide crude oil realization per barrel of $66.08 (including the impact of hedging) increased 40.7% year over year. Worldwide natural gas prices rose 22.7% year over year to $4.11 per Mcf, but lagged the Zacks Consensus Estimate of $4.44 per Mcf. Worldwide natural gas liquid prices increased 41.1% year over year to $24.29 per barrel.

Midstream: The company generated profits of $30 million, against a loss $12 million in the July-to-September quarter of 2017.

Operating Expenses

Operating expenses in the third quarter totaled $266 million, down more than 24% from the year-ago quarter’s figure of $353 million.

Financials

Quarterly net cash flow from operations was $423 million at the end of the quarter. Hess’ capital expenditures declined 2.9% to $542 million from $558 million in the prior-year quarter.

As of Sep 30, the company had approximately $3,004 million in cash and $6,609 million in long-term debt. The debt-to-capitalization ratio at the end of the quarter was 37.5%.

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 -91.82% due to these changes.

VGM Scores

At this time, Hess has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest 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.

Outlook

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




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