It has been about a month since the last earnings report for Diamondback Energy (FANG). Shares have added about 0.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Diamondback due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Diamondback Q3 Earnings Miss Estimates, Revenues Beat

Diamondback Energy reported third-quarter 2024 adjusted earnings per share of $3.38, which missed the Zacks Consensus Estimate of $3.80 and decreased from the year-ago adjusted figure of $5.49. The underperformance primarily reflects a fall in overall realization.

However, revenues of $2.6 billion rose 13% from the year-ago quarter’s sales and outperformed the Zacks Consensus Estimate by 6.6% on strong production.

FANG repurchased $515 million of shares in the third quarter and a further $185 million worth of shares in the current quarter. As previously announced, the company gave an additional $2 billion share repurchase approval.

Production & Realized Prices

FANG’s production of oil and natural gas averaged 571,098 barrels of oil equivalent per day (BOE/d), comprising 56% oil. The figure was up 26.1% from the year-ago quarter and beat our estimate of 565,040.9 BOE/d. While crude and natural gas output increased 20.6% and 34.6% year over year, respectively, natural gas liquids volumes rose 33.3%.

The average realized oil price during the most recent quarter was $73.13 per barrel, 10.3% lower than the year-ago realization of $81.57 but ahead of our projection of $66.34. Meanwhile, the average realized natural gas price plunged to (26 cents) per thousand cubic feet (Mcf) from $1.62 in the year-ago period and came below our estimate of 9 cents. Overall, the upstream oil and gas company fetched $44.80 per barrel compared with $54.37 a year ago.

Costs & Financial Position

Diamondback’s third-quarter cash operating cost was $11.49 per barrel of oil equivalent (BOE) compared with $10.51 in the prior-year quarter and our projection of $12.29. The rise in costs compared to the year-ago period reflected an increase in lease operating expenses to $6.01 per BOE from $5.42 in the third quarter of 2023. Further, FANG’s gathering, processing and transportation expenses increased 10.9% year over year to $1.94 per BOE, while cash G&A expenses rose in the third quarter of 2024 to 63 cents per BOE from 51 cents during the corresponding period of 2023. Compounding the issue, production and ad valorem taxes rose 2.8% year over year to $2.91 per BOE.

Diamondback spent $688 million in capital expenditure — $633 million on drilling and completion, $52 million on infrastructure, environment and $3 million on midstream. The company booked $1 billion in free cash flow in the third quarter. 

As of Sept. 30, the Permian-focused operator had approximately $373 million in cash and cash equivalents and $11.9 billion in long-term debt, representing a debt-to-capitalization of 25%.

Guidance

Diamondback Energy’s latest guidance takes into account the Endeavor merger, which was completed on Sept. 10. FANG looks to pump around 587,000-590,000 BOE/d of hydrocarbon in 2024, up from 462,000-470,000 BOE/d before. Of this, oil volumes are likely to be between 335,000 and 337,000 barrels per day (273,000-276,000 previously). The company also revised its forecast of a capital spending budget to between $2.88 billion and $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 -17.6% due to these changes.

VGM Scores

Currently, Diamondback has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, 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 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. 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.

Performance of an Industry Player

Diamondback is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, EQT Corporation (EQT), a stock from the same industry, has gained 19.4%. The company reported its results for the quarter ended September 2024 more than a month ago.

EQT reported revenues of $1.38 billion in the last reported quarter, representing a year-over-year change of +16%. EPS of $0.12 for the same period compares with $0.30 a year ago.

EQT is expected to post earnings of $0.41 per share for the current quarter, representing a year-over-year change of -14.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -17.3%.

EQT has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.

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