Bull of the Day: Berry Petroleum (BRY)
Berry Petroleum Company, LLC (BRY) is part of the oil revolution. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth this year even as Wall Street completely ignores it.
Berry Petroleum is a small cap California-based independent exploration and production company with reserves located in the western United States, particularly in the San Joaquin basin of California.
Full Year Production and Spending are on Track
On May 8, Berry reported its first quarter results and missed on the Zacks Consensus Estimate by just a penny. Earnings were $0.30 compared to the consensus of $0.31.
While the first quarter saw lower oil prices than the fourth quarter, the company was protected by its oil hedge.
California oil prices before hedges for the first quarter averaged $59.16/Bbl which were 6% lower than the $62.65/Bbl realized in Q4. Berry's realized oil prices before hedges of $56.88/Bbl were 8% lower than the fourth quarter average of $61.48.
Berry CEO Trem Smith commented that the full-year production and spending were on track.
It maintained capital expenditures of $49 million, with about 87% of that directed to California oil development.
One negative in the quarter was the weather. Berry saw a negative impact from the cool and wet winter which increased the demand for natural gas, which therefore increased pricing and negatively impacted the company's results for the quarter.
Analysts Raise Full Year 2019 and 2020 Estimates
Despite the penny miss, and the awful weather to start the year, the analysts are optimistic about earnings for both 2019 and 2020.
4 estimates were raised for 2019 in the last 60 days, with one estimate being raised in the last month as well.
The 2019 Zacks Consensus Estimate has jumped to $1.56 from $1.36 in the last 90 days. This is earnings growth of 23.8% from 2019 where the company made $1.26.
2020 is also looking bullish as 3 estimates have moved higher over the last 60 days and 1 higher in the prior month.
The 2020 Zacks Consensus Estimate has jumped to $1.69 from $1.07 over the last 3 months. That's earnings growth of 8.3%.
Berry is one of the few small cap E&Ps that pays a dividend. It's currently yielding a juicy 4.6%.
It has paid the dividend 4 quarters in a row now.
No dividend is ever guaranteed, but the company says it's committed to the dividend.
Shares Fall as Crude Weakens
No sector is as hated as energy on Wall Street. Not even retail.
Most of the E&Ps have seen significant weakness in 2019 as crude has weakened again. Berry shares have fallen 20.8% year-to-date but they're not yet at the end of 2018 lows, where the doom was being priced into the industry.
Still, the shares are dirt cheap here.
Berry has a forward P/E of just 6.6 and a PEG ratio of 0.4.
It's a rare value stock that also has growth. And investors get the dividend.
Is it time to start looking at the oil stocks again?
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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