A month has gone by since the last earnings report for Devon Energy (DVN). Shares have added about 3.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Devon Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Devon Energy Q4 Earnings Lag Estimates, Revenues Beat
Devon Energy Corp. reported fourth-quarter 2018 adjusted earnings per share of 10 cents, which lagged the Zacks Consensus Estimate of 31 cents by 67.7%.
However, quarterly revenues of $3,708 million outpaced the Zacks Consensus Estimate of $1,966 million by a whopping 88.6%. Moreover, total revenues were up 55.8% from the year-ago figure of $2,380 million.
This improvement in revenues can be attributed to solid contribution from upstream businesses.
Highlights of the Release
Total production in fourth-quarter 2018 touched 532,000 barrels of oil equivalent per day (Boe/d). Notably, the actual production was within the company’s expected range of 515,000-543,000 Boe/d. Devon Energy’s strong production is attributable to growth in the company’s four key oil assets: Delaware Basin, STACK, Powder River Basin and Eagle Ford.
In 2018, Devon Energy’s oil-driven capital programs in the United States added 232 million Boe of reserves (extensions and discoveries). This represents a reserve replacement rate of nearly 150% in the United States.
During the reported quarter, total expenses decreased 4.7% year over year to $2,224 million.
The company continues to advance its $5-billion share repurchase plan. The company has repurchased 90 million shares under the program, and the entire fund, when utilized, will reduce the total share count by 30%. This, in turn, will have a positive impact on its earnings.
Realized oil prices in the quarter were $34.58 per barrel, down 18.1% from $42.21 in the year-ago period. Realized prices for natural gas were up 4.8% to $2.20 per thousand cubic feet from $2.48 in the prior-year quarter.
Total realized prices, including cash settlements, were $25.93 per Boe, down 6.7% year over year.
As of Dec 31, 2018, the company generated cash and cash equivalents of $2,414 million, down from $2,642 million recorded in the corresponding period of 2017. As of Dec 31, 2018, long-term debt amounted to $5,785 million, down from $6,749 million on Dec 31, 2017.
Devon Energy’s cash flow from operating activities in 2018 was $2,228 million compared with $2,209 million a year ago.
Devon Energy estimates total production from its assets in the first quarter of 2019 within 478,000-514,000 Boe/d, while the same for 2019 is expected to average 496,000-514,000 Boe/d.
E&P capital expenditure for 2019 is expected within $2,050-$2,310 million, while $530-$605 million is anticipated to be invested in the first quarter .
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -20.11% due to these changes.
Currently, Devon Energy has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Devon Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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