A month has gone by since the last earnings report for Cabot Oil (COG - Free Report) . Shares have added about 5.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cabot 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.
Cabot Q4 Earnings Jump, Costs Decline
Cabot Oil & Gas Corporation reported fourth quarter earnings per share – adjusted for special items – of 55 cents, below the Zacks Consensus Estimate of 58 cents due to lower-than-anticipated production. Precisely, the company’s production came in at 206.3 billion cubic feet equivalent (Bcfe), lagging the Zacks Consensus Estimate of 208 Bcfe. However, the exploration and production firm’s bottom line witnessed a healthy improvement from the year-ago quarter’s adjusted profit of 13 cents on higher realized natural gas prices.
Houston, TX-based Cabot’s quarterly revenue improved 78.9% year over year to $716.3 million and beat the Zacks Consensus Estimate of $655 million.
Production, Prices & Drilling Statistics
Cabot’s overall production during the quarter totaled 206.3 Bcfe – 100% gas – up 19.5% from the prior year quarter volume of 172.6 Bcfe. However, output came below the Zacks Consensus Estimate of 208 Bcfe. The average realized natural gas price increased 42.7% from the year-ago quarter to $3.11 per thousand cubic feet. Cabot drilled 37 net wells and completed 33 during the quarter.
Costs & Expenses
Total operating expenses were 49.5% lower than the fourth quarter of 2017, declining to $376.3 million. While transportation and gathering costs were up 17.9% year over year to $140.9 million, the absence of oil and gas property write-offs – that amounted to $414.3 million in the year-ago quarter – aided the significant fall in operating expenses. Meanwhile, Cabot’s depreciation, depletion and amortization expenses fell 9.7% from the year-ago period to $129.3 million.
Operating cash flows were $316.1 million for the quarter (up 76.4% year over year), while capital expenditures totaled $247 million (up 38.9%). As of Dec 31, 2018, the company had $1.2 billion in long-term debt, with a debt-to-capitalization ratio of 37%. During the quarter, Cabot repurchased approximately $259 million of its stock.
As of year-end 2018, Cabot had 11.6 trillion cubic feet equivalent in proved reserves, up 19% year over year.
For the first quarter, Cabot provided its net production guidance in the range of 2,250-2,275 million cubic feet equivalent a day. Cabot also revised its expectations for 2019. It projects the production growth to be 20% as against the previous guidance in the 20-25% range. The production growth is based on a capital expenditure projection of $800 million (the earlier range was between $800-$850 million).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 7.09% due to these changes.
Currently, Cabot has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Cabot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.