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Why Is Devon Energy (DVN) Down 15.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Devon Energy (DVN - Free Report) . Shares have lost about 15.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Devon Energy 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 drivers.

Devon Energy Q1 Earnings Beat Estimates, Guidance Up

Devon Energy Corp.  reported first-quarter 2019 adjusted earnings per share of 36 cents, which surpassed the Zacks Consensus Estimate of 30 cents by 20%.
 
Revenues

Quarterly revenues of $1,501 million lagged the Zacks Consensus Estimate of $2,522 million by 40.5%. Moreover, total revenues were down 31.7% from the year-ago figure of $2,198 million.

This year-over-year decline in revenues was due to lower contribution from upstream and marketing businesses.

Highlights of the Release

Total production in first-quarter 2019 touched 529,000 barrels of oil equivalent per day (Boe/d). Notably, the actual production was better than the company’s expected range of 478,000-514,000 Boe/d. Devon Energy’s strong production is attributable to growth in the Delaware Basin.

During the first quarter, the company continued to make progress via improving operating and corporate cost structure. Its largest field-level cost, lease operating expense, improved to $4.63 per barrels of oil equivalent (Boe) in the quarter. However, on a per-unit basis, lease operating expense declined 10% sequentially.

During the reported quarter, total expenses decreased 21.1% year over year to $1,928 million.
 
The company continues to advance its $5-billion share repurchase plan. The company has repurchased an aggregate of 114 million shares under the program for $4 billion. It expects to complete the repurchase program by end of this year, which will surely have a positive impact on earnings.

Realized Prices

Realized oil prices in the quarter were $43.02 per barrel, up 7.4% from $40.05 in the year-ago period. Realized prices of natural gas were down 8.5% to $2.36 per thousand cubic feet from $2.58 in the prior-year quarter.

Total realized prices, including cash settlements, were $29.01 per Boe, up 3.7% year over year.

Financial Health

As of Mar 31, 2019, the company generated cash and cash equivalents of $1,327 million, down from $2,414 million recorded on Dec 31, 2018. As of Mar 31, 2019, its long-term debt amounted to $5,786 million, almost in line with $5,785 million on Dec 31, 2018.

Devon Energy’s cash flow from operating activities in first-quarter 2019 was $377 million compared with $610 million in the year-ago period.
 
Guidance


Devon Energy estimates total oil production from its assets for the second quarter of 2019 within 134,000-141,000 Boe/d.

It also expects 2019 light-oil production growth to reach 17% year over year, indicating a 200-basis point improvement from the year-ago reported figure.

E&P capital expenditure for 2019 is expected within $1.8-$2 billion, of which nearly 50% will be directed to strength its Delaware assets.

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 -6.2% due to these changes.

VGM Scores

Currently, Devon Energy has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Devon Energy has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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