Range Resources (RRC) Down 21.1% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Range Resources (RRC). Shares have lost about 21.1% in that time frame, underperforming the S&P 500.

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

Range Resources’ Q4 Earnings Beat Estimates But Fall Y/Y

Range Resources Corporation (NYSE:RRC) posted fourth-quarter 2019 adjusted earnings of 8 cents per share, beating the Zacks Consensus Estimate of a break even. However, the bottom line declined from the year-ago quarter’s 21 cents.

In the fourth quarter, total revenues amounted to $606 million, missing the Zacks Consensus Estimate of $639 million. Moreover, the top line deteriorated from the prior-year quarter’s $1,072.6 million.

The better-than-expected earnings were supported by higher natural gas equivalent production volumes. This was partially offset by lower price realizations of commodities.

Operational Performance

During the fourth quarter, the company’s production averaged 2,345.2 million cubic feet equivalent per day (MMcfe/d), up 9% from the prior-year quarter. Natural gas contributed almost 70% to total production, while natural gas liquid (NGL) and oil accounted for the remaining.

Oil and NGL production increased 5% and 6%, respectively, on a year-over-year basis. Moreover, natural gas production increased 11%.

The company’s total price realization (including derivative settlements and after third-party transportation costs) averaged $1.37 per thousand cubic feet equivalent (Mcfe), down 26% year over year.

While natural gas price declined 21% on a year-over-year basis to $1.24 per thousand cubic feet, NGL and oil prices dropped 45% and 2%, respectively.

Expenses

The exploration cost declined to $9.2 million from the prior-year number of $10.2 million. Moreover, direct operating costs contracted to $33.3 million from the year-ago $34.9 million.

Capital Expenditure & Financials

The company incurred drilling and completion expenditures worth $126 million in the reported quarter. At the end of the fourth quarter, the company had long-term debt of $3,172.9 million, with a debt-to-capitalization ratio of 57.5%.

Guidance

For 2020, the company expects production volumes of 2.3 billion cubic feet equivalent per day (Bcfe/D), almost the same as 2019 production volumes.

The company expects 2020 capital expenditure of $520 million, lower than $728 million in 2019. Notably, 94% of the total capital budget will be allocated for drilling and recompletions.

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 -528.57% due to these changes.

VGM Scores

Currently, Range Resources has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 F. 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, Range Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.