On Jun 15, Zacks Investment Research downgraded independent
oil and gas exploration and production (E&P) company,
Cabot Oil & Gas Corporation
) to a Zacks Rank #5 (Strong Sell).
ANADARKO PETROL (APC): Free Stock Analysis
CABOT OIL & GAS (COG): Free Stock Analysis
ENCANA CORP (ECA): Free Stock Analysis Report
HARVEST NATURAL (HNR): Free Stock Analysis
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Why the Downgrade?
Cabot witnessed sharp downward estimate revisions after reporting
weak first-quarter 2013 results. In fact, the company has
delivered negative earnings surprises in 2 of the last 4 quarters
with an average miss of 15.95%.
On Apr 24, 2013, Cabot reported earnings per share, excluding
special items, of 20 cents, missing the Zacks Consensus Estimate
of 25 cents. The underperformance resulted from lower realized
natural gas prices.
Cabot's 2013 capital expenditure guidance - at $950-$1,025
million - add to the negative sentiment, as we do not expect this
rate of spending to be matched by increased cash flows at the
current gas price level. Accordingly, we apprehend a free cash
flow deficit in 2013.
Moreover, we remain worried about volatile natural gas
fundamentals and Cabot's high exposure to the commodity. Unless
the outlook for natural gas prices improves, we do not see any
significant price upside in Cabot shares.
A combination of all these factors weighed on the earnings
estimates for Cabot in the last 60 days. The Zacks Consensus
Estimate for the second quarter of 2013 has gone down by 19.35%
to 25 cents per share while it dropped 10.87% to $1.23 per share
Other Stocks to Consider
Not all E&P companies are performing as poorly as Cabot. The
Anadarko Petroleum Corporation
Harvest Natural Resources Inc.
) are worth considering. All these stocks carry a Zacks Rank #2