What's in the Offing for Diamondback (FANG) Q2 Earnings?

Diamondback Energy, Inc. FANG is set to release second-quarter 2020 results on Monday Aug 3, after the closing bell.

The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at 13 cents per share and the same for revenues stands at $600.91 million.

Against this backdrop, let’s consider the factors that are likely to impact the company’s June-quarter results.

Factors Likely to Impact Q2 Results

The twin acquisitions of Energen Corporation and Ajax Resources in 2018 transformed Diamondback into one of the leading Permian Basin oil producers, driving significant production growth. The trend is likely to have continued in the second quarter as well. This is because, earlier this month, management provided an operational update on the second quarter wherein it reported that production of oil and natural gas averaged at 294,100 barrels of oil-equivalent per day (Boe/d) in the quarter under review, beating the Zacks Consensus Estimate of 293,315 Boe/d and increasing 4.9% from the year-ago reported figure of 280,365 Boe/d. This production growth is likely to have enhanced Diamondback’s earnings in the second quarter.

However, the Permian pure play’s top line is likely to have been hurt in the second quarter due to weaker year-over-year average oil price realization. Precisely, the average realized crude oil price in the second quarter was $21.99 per barrel, plunging 59.3% from the year-earlier figure of $54.

While a substantial increase in output is expected to have boosted Diamondback’s second-quarter earnings, lower year-over-year crude oil prices might dent its overall results.

What Does Our Model Say?

Our proven Zacks model predicts an earnings beat for Diamondback 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 beating estimates.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Diamondback has an Earnings ESP of +8.37%.

Zacks Rank: Diamondback carries a Zacks Rank #3, which increases the predictive power of ESP.

Highlights of Q1 Earnings & Surprise History

Diamondback reported strong first-quarter 2020 results. Better-than-expected production led to this outperformance. Precisely, overall volume came in at 321.1 thousand barrels of oil equivalent per day (MBOE/d), beating the Zacks Consensus Estimate of 306.7 MBOE/d.

The company’s adjusted net income per share of $1.45 outpaced the Zacks Consensus Estimate of $1.32 and also increased 4.3% from the year-ago figure of $1.39.

However, this Permian pure play’s total revenues of $899 million missed the Zacks Consensus Estimate of $966 million due to weaker-than-expected average oil price realization. Precisely, the average realized crude oil price in the first quarter was $45.10 per barrel, lagging the Zacks Consensus Estimate of $47.57.  However, the top line improved 4% from the year-earlier figure of $864 million.

As far as the earnings surprise track is concerned, this Midland, TX-based company shows a mixed record with its bottom line having surpassed the Zacks Consensus Estimate twice in the last four quarterly reports, missing the mark on the remaining two occasions. The average surprise is 0.18%. This is depicted in the graph below:

Diamondback Energy, Inc. Price and EPS Surprise

Diamondback Energy, Inc. Price and EPS Surprise

Diamondback Energy, Inc. price-eps-surprise | Diamondback Energy, Inc. Quote

Other Stocks to Consider

Here are some other firms worth considering from the energy space on the basis of our model, which shows that these too have the right combination of elements to beat on earnings this season:

Imperial Oil Limited IMO has an Earnings ESP of +0.61% and a Zacks Rank of 3 at present. The company is scheduled to release earnings on Jul 31.

USA Compression Partners, LP USAC has an Earnings ESP of +25.00% and is presently Zacks #1 Ranked. The firm is scheduled to release earnings on Aug 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Williams Companies, Inc. WMB currently has an Earnings ESP of +5.44% and a Zacks Rank of 3. The firm is scheduled to release earnings on Aug 3.

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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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