Cenovus (CVE) Up 20.1% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Cenovus Energy (CVE). Shares have added about 20.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cenovus due for a pullback? 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 Energy Q1 Earnings Missed Estimates

Cenovus Energy reported first-quarter 2020 loss per share of 72 cents, wider than the Zacks Consensus Estimate of a loss of 19 cents. In the prior-year quarter, the integrated energy firm reported earnings of 5 cents per share.

Revenues of $2,994 million missed the Zacks Consensus Estimate of $3,230 million. Moreover, the top line declined from the year-ago figure of $3,908 million.

The leading energy firm’s weak quarterly results were primarily because of lower contributions from oil sands and refining operations. The coronavirus pandemic hurt global energy demand that dented refining margins and led crude to trade in the bearish territory. Thus, the virus outbreak hurt Cenovus Energy’s overall business in the March quarter.

Operational Performance

Quarterly gross revenues from the Oil Sands unit fell to C$2,027 million from C$2,427 million in first-quarter 2019. In the March quarter, the company recorded daily oil sand production of 387,036 barrels, up 12.8% year over year.

Notably, the segment’s operating loss was C$680 million against the year-ago quarter’s profit of C$467 million owing to higher transportation & blending expenses and lower realized crude prices.

Gross revenues at the Conventional unit were C$162 million, down from C$220 million in the year-ago quarter. In the March quarter, the company recorded daily oil sand production of 29,766 barrels, up 6.3% year over year.

The segment’s operating loss came in at C$356 million against a profit of C$8 million in the year-ago quarter due to higher transportation & blending expenses.

The Refining and Marketing segment generated gross revenues of C$2,049 million, down from C$2,689 million a year ago. Moreover, the unit’s operating loss was C$454 million against a profit of C$224 million due to lower market crack spreads.

Expenses

Transportation and blending expenses in the reported quarter increased to C$1,611 million from C$1,159 million a year ago. However, expenses for purchased products fell to C$1,805 million from C$2,105 million.

Capital Expenditures & Balance Sheet

The company incurred total capital expenditure of C$304 million in the quarter under review.

As of Mar 31, 2020, the Canadian energy player had cash and cash equivalents of C$160 million and total long-term debt of C$6,979 million. Its total debt-to-capitalization ratio was 0.29.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Cenovus has an average Growth Score of C, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Cenovus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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