Bear Of The Day: Diamondback Energy

I suppose you really don’t need me to point out any sort of Bear of the Day for you with so many stocks under pressure. It’s upsetting, even to the most seasoned stock market vets. Still, there are concerning earnings trends that need to be brought to light. It is the Zacks Rank which helps uncover these earnings trends. Zacks aggregates earnings estimates from all over Wall Street and uses these numbers to find stocks with the strongest, and the weakest trends. Stocks with the weakest earnings trends fit into the notorious Zacks Rank #5 (Strong Sell) category.

Today’s Bear of the Day is Zacks Rank #5 (Strong Sell) Diamondback Energy (FANG). Diamondback Energy, Inc., an independent oil and natural gas company, focuses on the acquisition, development, exploration, and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas. It primarily focuses on the development of the Spraberry and Wolfcamp formations of the Midland basin; and the Wolfcamp and Bone Spring formations of the Delaware basin, which are part of the Permian Basin in West Texas and New Mexico.

Oil prices remain under pressure as an all-out supply war wages between the Saudis and Russians. During the March 17^th trading session, crude prices came down to under $27 per barrel. That’s obviously put oil production and exploration companies behind the eight ball. This disturbing trend began weeks ago, with analysts already revising their numbers to the downside.

Over the last sixty days, twelve analysts have lowered their earnings estimates for the current year, while seven analysts have dropped their numbers for next year. The negative revisions have had a drastic impact on our Zacks Consensus Estimate. The current year number has come down from $9.24 to $7.44. Nest year’s number has dropped from $9.70 to $8.37.

Diamondback Energy, Inc. Price and Consensus

Diamondback Energy, Inc. Price and Consensus

Diamondback Energy, Inc. price-consensus-chart | Diamondback Energy, Inc. Quote

To be fair, eventually the valuations here have to become attractive. There is still earnings growth forecast year-over-year for next year. Current P/E is all the way down at 3.16x. That’s below the industry average of 5x and well below the market’s average of 14.64.

Investors looking for other stock ideas within the same industry have several names to check out. Among them are two Zacks Rank #1 (Strong Buy) stocks. Those are Antero Resources (AR) and Eclipse Resources (MR).

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