What's In The Offing For Diamondback (FANG) Q4 Earnings?

Diamondback Energy, Inc. (NASDAQ:FANG) is set to release fourth-quarter 2019 results on Tuesday Feb 18, after the closing bell.

The current Zacks Consensus Estimate for the to-be-reported quarter is pegged at earnings of $1.81 per share on expected revenues of $1.09 billion. There has been no change in estimates for the bottom line over the past 30 days.

Let’s delve into the factors that might have impacted the company’s performance in the December quarter.

Factors Likely to Impact Q4 Results

The twin acquisitions of 2018, namely Energen Corporation and Ajax Resources transformed Diamondback into one of the leading Permian Basin oil producers, driving significant production growth. This trend most likely continued in the fourth quarter of 2019 as well.

Recently, the company reported fourth-quarter average daily production, which surged almost 65% to 301.3 million barrels of oil equivalent per day (MBOE/d) from 182.8 MBOE/d in the corresponding period of last year. The released figure even surpassed the Zacks Consensus Estimate of 295.6 MBOE/D. Of the total output, 65% comprised oil while the rest consisted of natural gas and natural gas liquids. Additionally, the company’s impending results might reflect a stronger impact of realized crude prices than the year-ago recorded figure. The Zacks Consensus Estimate for crude oil prices is pegged at $54 per barrel, hinting at an 18.6% increase from the prior-year reported realization of $45.51.

However, the company’s upcoming quarterly results are expected to reflect a weaker impact of realized natural gas prices than the year-ago reported level. The Zacks Consensus Estimate for fourth-quarter average natural gas price realization stands at 98 cents per thousand cubic feet, implying a 39.5% decline from $1.62 reported a year ago.

While significant output growth is expected to have boosted Diamondback’s fourth-quarter 2019 earnings, lower year-over-year natural gas prices might have dented overall results.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for Diamondback this time around. The right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

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 -2.95%.

Zacks Rank: Diamondback carries a Zacks Rank #3.

The above combination leaves surprise prediction inconclusive.

Highlights of Q3 Earnings & Surprise History

In the last reported quarter, Diamondback posted disappointing third-quarter 2019 results. Waning natural gas price realizations caused this underperformance. Precisely, natural gas prices came in at 62 cents per thousand cubic feet (Mcf), missing the Zacks Consensus Estimate of $1.05 and the year-ago figure of $1.86 as well. Moreover, the company’s adjusted net income per share of $1.47 lagged the Zacks Consensus Estimate of $1.71 and also decreased 12% from the year-ago figure of $1.67.

Further, this Permian pure play’s total revenues of $975 million fell short of the Zacks Consensus Estimate of $1,051 million but soared nearly 82% from the year-earlier figure of $538 million, primarily owing to increased contribution from the midstream services.

As far as the earnings surprise track is concerned, this Midland, TX-headquartered company’s bottom line missed the Zacks Consensus Estimate in three of the trailing four quarters, beating the same in the remaining quarter, the average negative surprise being 9.86%. This is depicted in the graph below:

Stocks to Consider

Here are some stocks worth considering from the energy space, which per our model have the perfect combination of elements to beat on earnings this reporting cycle:

Noble Corporation (NYSE:NE) has an Earnings ESP of +4.23% and a Zacks Rank of 3. The company is slated to announce fourth-quarter 2019 earnings on Feb 19.

Williams Companies, Inc. (NYSE:WMB) has an Earnings ESP of +6.78% and is Zacks #3 Ranked. The company is slated to announce fourth-quarter 2019 earnings on Feb 19.

Energy Transfer, L.P. (NYSE:ET) has an Earnings ESP of +4.86% and is a #3 Ranked stock. The partnership is slated to release fourth-quarter earnings on Feb 19. You can see the complete list of today’s Zacks #1 Rank stocks here.

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