Why Is Devon Energy (DVN) Down 76.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Devon Energy (DVN). Shares have lost about 76.2% in that time frame, underperforming the S&P 500.

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

Devon Energy Q4 Earnings Beat Estimates, Revenues Lag

Devon Energy Corp. reported fourth-quarter 2019 adjusted earnings per share of 33 cents, which beat the Zacks Consensus Estimate of 29 cents by 13.8%.

Revenues

However, quarterly revenues of $1,589 million missed the Zacks Consensus Estimate of $1,835 million by 13.4%. Moreover, total revenues declined 55% from the year-ago quarter’s figure of $3,530 million.

Highlights of the Release

Total net production from Devon’s retained assets in fourth-quarter 2019 touched 340,000 barrels of oil equivalent per day (Boe/d). Oil production averaged 160,000 barrels per day, touched the upper end of the guidance of 154,000-160,000 barrels per day. Oil production increased 28% on a year over year basis courtesy of strong well productivity and timing of completions in the Delaware Basin.

To reward shareholders, the company is paying out steady quarterly common stock dividend. The company announced that its board of directors approved a 22% increase to its quarterly common stock dividend to 11 cents per share, up from the prior rate of 9 cents. The new quarterly dividend rate is effective in the second quarter of 2020.

During the reported quarter, total expenses declined 7% year over year to $1,610 million.

Devon repurchased shares worth $1.85 billion in 2019. The company’s board of directors announced its new $1 billion share repurchase program.

Realized Prices

Realized oil prices in the quarter were $56.89 per barrel, up 0.6% from $56.56 in the year-ago quarter’s figure. Realized prices for natural gas were down 21.4% to $1.83 per thousand cubic feet from $2.33 in the prior-year quarter.

Total realized prices, including cash settlements, were $34.14 per Boe, down 0.6% year over year.

Financial Health

As of Dec 31, 2019, the company generated cash and cash equivalents of $1,464 million, down from $2,414 million recorded in the corresponding period of 2018. As of Dec 31, 2019, long-term debt amounted to $4,294 million, up from $4,292 million on Dec 31, 2018.

Devon Energy’s net cash from operating activities from continuing operations in 2019 was $2,043 million.

Guidance

Devon Energy estimates total production from its assets in the first quarter of 2020 in the range of 328,000-342,000 Boe/d. The same for 2020 is expected in the range of 328,000-339,000 Boe/d.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -65.66% due to these changes.

VGM Scores

Currently, Devon Energy has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 Devon Energy has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.