What's in the Offing for Diamondback (FANG) Q1 Earnings?

Diamondback Energy, Inc. FANG is set to release first-quarter 2020 results on Monday May 4, after the closing bell.

The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at of $1.42 per share on expected revenues of $983.74 million.

Against this backdrop, let’s consider the factors that are likely to impact the company’s March-quarter results.

Factors Likely to Impact Q1 Results

The twin acquisitions of Energen Corporation and Ajax Resources in 2018 transformed Diamondback into one of the leading Permian Basin oil producers, driving significant production growth. This trend is expected to have continued in the first quarter as well. The Zacks Consensus Estimate for first-quarter total production is pegged at 27,848 thousand barrels of oil-equivalent (MBOE), indicating a 17.8% increase from the year-ago reported figure of 23,637 MBOE.

We all know that the oil price has been trending in the bear territory following the coronavirus pandemic’s adverse impact on global energy demand. As a result, the outlook for all industries in the energy sector is persistently drab. Thus, energy players are limiting their operational activities by trimming capital budgets. However, the coronavirus impact on overall demand for Diamondback’s oil products is likely to intensify in the second quarter.

Coming back to the first quarter, the company’s upcoming results are expected to reflect a weaker impact of realized natural gas prices than the year-ago reported level. The Zacks Consensus Estimate for first-quarter average natural gas price realization stands at 63 cents per thousand cubic feet, implying a 52.3% decline from $1.32 reported a year ago.

While substantial output growth is expected to have boosted Diamondback’s first-quarter earnings, lower year-over-year natural gas prices might have dented its overall results.

What Does Our Model Say?

Our proven Zacks model does not conclusively predict an earnings beat for Diamondback this time around. The right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Diamondback has an Earnings ESP of +3.81%.

Zacks Rank: Diamondback carries a Zacks Rank #5 (Strong Sell).

Highlights of Q4 Earnings & Surprise History

Diamondback 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.

As far as the earnings surprise track is concerned, this Midland, TX-based company shows a mixed record, having surpassed the Zacks Consensus Estimate twice in the last four quarterly reports, missing the mark on the remaining two occasions. The negative surprise is 1.73%, on average. This is depicted in the graph below:

Diamondback Energy, Inc. Price and EPS Surprise

Diamondback Energy, Inc. Price and EPS Surprise

Diamondback Energy, Inc. price-eps-surprise | Diamondback Energy, Inc. Quote

Stocks to Consider

While an earnings outperformance looks uncertain for Diamondback, here are some firms worth considering from the energy space as our model shows that these have the right combination of elements to outpace estimates this reporting cycle:

Southwestern Energy Company SWN has an Earnings ESP of +3.90% and a Zacks Rank #2. The firm is scheduled to release earnings on Apr 30.

Comstock Resources, Inc. CRK has an Earnings ESP of +2.63% and a Zacks Rank of 2. The company is scheduled to release earnings on May 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Laredo Petroleum, Inc. LPI has an Earnings ESP of +2.50% and is Zacks #3 Ranked. The firm is scheduled to release earnings on May 6.

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