SM Energy Company SM is set to report second-quarter 2024 results on Aug 7, 2024, after the closing bell.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.57 per share, implying an improvement of almost 23% from the year-ago reported number. The estimate was revised downward by two analysts in the past 30 days against two upward movements. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $629.6 million, suggesting a 14.3% improvement from the year-ago reported number.
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SM beat the consensus estimate for earnings in each of the trailing four quarters, with the average surprise being 13.8%. This is depicted in the graph below:
SM Energy Company Price and EPS Surprise
SM Energy Company price-eps-surprise | SM Energy Company Quote
Q2 Earnings Whispers
Our proven model doesn’t predict an earnings beat for SM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.
The independent upstream energy company has an Earnings ESP of -4.10% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q2 Results
According to the U.S. Energy Information Administration, the average spot prices for West Texas Intermediate (WTI) crude at Cushing, OK, were $85.35 per barrel in April, $80.02 per barrel in May and $79.77 per barrel in June. The favorable crude pricing environment in the second quarter is likely to have aided SM Energy's exploration and production activities, potentially boosting the company’s production volumes.
The Zacks Consensus Estimate for SM’s oil equivalent production in the June quarter is pegged at 14.25 million barrels of oil equivalent (MMBoE), suggesting an improvement from 14.1 MMBoE in a year-ago quarter.
Price Performance & Valuation
SM's stock has jumped 7.1% over the past year against the industry’s fall of 5.3%. EOG Resources, Inc. EOG and Matador Resources Company MTDR are two other well-known upstream energy companies. While EOG has gained 0.3%, Matador Resources declined 5.7% over the same time frame.
One-Year Price Chart
Image Source: Zacks Investment Research
On the valuation front, SM appears relatively undervalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 3.71, which is trading at a discount compared to the industry average of 7.32.
Image Source: Zacks Investment Research
Investment Thesis
SM Energy is a leading upstream energy player with a strong presence in the Midland basin and South Texas. Thus, the company’s production outlook looks bright as the owner of the top-tier assets.
SM Energy has inked an accord to acquire the Uinta Basin oil and gas assets for a net purchase price of $2.04 billion. Once the acquisition closes, likely in September 2024, it will add approximately 37,200 net acres, boosting the core net acreage of the exploration and production company by roughly 14%. With the acquisition, the company expects its proforma net production for 2025 to increase to roughly 195 thousand barrels of oil equivalent per day, with oil production likely to constitute more than 50% of the commodity mix???. The acquisition is expected to generate significant wealth for shareholders.
Last Word
Considering the above factors, it would be prudent for investors to buy the stock, which is currently relatively undervalued.
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Matador Resources Company (MTDR) : Free Stock Analysis Report
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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.
