Cenovus (CVE) Down 70.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Cenovus Energy (CVE). Shares have lost about 70.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cenovus due for a breakout? 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 catalysts.

Cenovus’ Q4 Earnings and Revenues Lag Estimates

Cenovus Energy reported fourth-quarter 2019 loss per share of 10 cents. The Zacks Consensus Estimate of profit was pegged at 8 cents. The bottom line, however, was narrower than loss of $1.03 per share in fourth-quarter 2018.

Revenues of $3,665 million missed the Zacks Consensus Estimate of $4,121 million. However, the top line increased from the year-ago figure of $3,439 million.

The leading integrated energy firm’s weaker-than-expected quarterly results were primarily owing to higher transportation and blending expenses along with lower margins from the Refining and Marketing business. This was, however, partially offset by higher oil sand production volumes.

Operational Performance

Quarterly gross revenues from the Oil Sands unit increased to C$2,659 million from C$1,380 million in fourth-quarter 2018, courtesy of higher production volumes of oil sands. In the December quarter, the company recorded daily oil sand production of 374,132 barrels, up 15% year over year.

Moreover, the segment’s operating margin was C$674 million against the year-ago quarter’s loss of C$178 million, thanks to higher realized sales price and lower transportation & blending expenses.

Gross revenues from the Deep Basin unit were flat year over year at C$190 million. Moreover, the segment’s operating margin came in at C$81 million, up from C$62 million in the year-ago quarter, due to lower operating expenses.

The Refining and Marketing segment generated gross revenues of C$2,555 million, down from C$3,048 million a year ago. Moreover, the unit’s operating margin was C$109 million, down from C$251 million, owing to the rise in Canadian heavy crude price.

Expenses

Transportation and blending expenses in the reported quarter increased to C$1,416 million from C$1,269 million in the year-ago quarter. However, expenses for purchased products fell to C$2,059 million from C$2,555 million.

Capital Expenditures & Balance Sheet

The company incurred total capital expenditure of C$317 million in the quarter under review.

Notably, Cenovus generated $361 million in free funds flow. As of Dec 31, 2019, the Canadian energy player had cash and cash equivalents of C$186 million, and total long-term debt of C$6,699 million. Its total debt-to-capitalization ratio was 25.9%.

Reserves

The company reported its total proved reserves of 5.1 billion barrels of oil equivalent, unchanged year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -157.69% due to these changes.

VGM Scores

At this time, Cenovus has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cenovus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.