Diamondback (FANG) Down 80.4% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Diamondback Energy (FANG). Shares have lost about 80.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Diamondback 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 drivers.

Diamondback's Q4 Earnings & Sales Beat Estimates

Diamondback Energy, Inc. reported strong fourth-quarter 2019 results. Better-than-expected production led to this outperformance. Precisely, overall volume came in at 301.3 thousand barrels of oil equivalent per day (MBOE/d), beating the Zacks Consensus Estimate of 299.6 MBOE/d.

The company’s adjusted net income per share of $1.93 outpaced the Zacks Consensus Estimate of $1.8 and also increased 59.5% from the year-ago figure of $1.21.

Further, this Permian pure play’s total revenues of $1,104 million came ahead of the Zacks Consensus Estimate of $1,088 million and even soared nearly 74.4% from the year-earlier figure of $633 million.

Dividend Hike by Twofold

Diamondback’s board of directors announced a 100% hike in quarterly dividend to 37.5 cents per share from the previous rate of 18.8 cents. The new quarterly dividend will be paid out on Mar 10, 2020 to its shareholders of record as of Mar 3, 2020. The current annual dividend yield of the company is 2%.

Production & Realized Prices

The 2018 buyouts of Energen Corporation and Ajax Resources helped Diamondback transform into one of the leading Permian Basin oil producers. Production of oil and natural gas averaged 301.3 MBOE/d comprising 65% oil. The figure jumped 64.8% from the year-ago quarter and also marginally surpassed the Zacks Consensus Estimate of 299.6 MBOE/d. While oil production surged 49.8% year over year, natural gas volumes more than doubled.

The average realized crude oil price in the fourth quarter was $54.74 per barrel, reflecting a 20.28% rise from the year-ago realization of $45.51. Overall, the company fetched $39.28 per barrel compared with $37.01 a year ago.

Expenses & Financials

Fourth-quarter cash operating cost was $8.77 per barrel of oil equivalent (BOE), up 8.3% from the prior-year figure of $8.10 per BOE. Diamondback’s cash G&A expense was 73 cents, higher than 49 cents in the fourth quarter of 2018. Moreover, lease operating expense of $4.52 was slightly up year over year. Meanwhile, production taxes rose nearly 4.2% from the prior-year quarter to $2.46 per BOE.

Capital expenditure in the quarter totalled $748 million. The company shelled out $652 million on drilling and completion and spent another $23 million on non-operated properties. Plus, infrastructure and midstream budget amounted to $73 million.

As of Dec 31, 2019, this Permian-focused operator had $123-million in cash and cash equivalents, and long-term debt of $5.4 billion. The debt-to-capital ratio of the Zacks Rank #3 (Hold) company was 28.8%.

Guidance

Diamondback projects 2020 average daily production of 310-325 MBOE/d. Its average daily oil production is estimated between 205 MBO/d and 215 MBO/d with expected capital spend of $2.8-$3 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -13.26% due to these changes.

VGM Scores

At this time, Diamondback has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Diamondback has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.