On Aug 21, Zacks Investment Research downgraded independent
oil and natural gas company,
EXCO Resources Inc
), to Zacks Rank #3 (Hold).
Why the Downgrade?
On Aug 5, the Texas-based energy explorer reported second quarter
2013 adjusted earnings of 10 cents per share, missing the Zacks
Consensus Estimate by a penny. This was the company's second miss
in the last four quarters.
A 23.6% year-over-year drop in overall production volume due to
normal field declines and conventional properties' contribution
to the EXCO-HGI partnership affected the results. However,
revenues increased 27.4% y-o-y to $150.3 million, beating the
Zacks Consensus Estimate of $140.0 million on the back of a sharp
rise in the commodity prices.
Despite its disciplined cost control measures, capex budget is
expected to be on the rise. EXCO plans to increase its well count
which will also be a contributor to its rising costs.
A silver lining is that dry-gas focused EXCO's liquid-weighted
Eagle Ford and Haynesville acquisition is expected to increase
production volumes and strengthen the company's portfolio.
Favorable commodity prices also act as a positive for the
The Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
), for the third quarter and full year are negative 7.14% and
5.77% respectively. The Zacks Consensus Estimate for the full
year is currently pegged at $0.52, after moving down a penny in
the last 30 days.
WILLIAMS(C)ENGY (CWEI): Free Stock Analysis
MATADOR RESOURC (MTDR): Free Stock Analysis
RANGE RESOURCES (RRC): Free Stock Analysis
EXCO RESOURCES (XCO): Free Stock Analysis
To read this article on Zacks.com click here.
Stocks That Warrant a Look
While we expect EXCO to perform in line with its peers and
industry levels in the coming months and advice investors to wait
for a better entry point before accumulating shares, one can look
at other exploration and production (E&P) companies such as
Range Resources Corp.
Clayton Williams Energy, Inc.
Matador Resources Company
) as good buying opportunities. These stocks sport a Zacks Rank
#1 (Strong Buy) and offer tremendous value.