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Why We Expect SM Energy (SM) to Deliver Q3 Earnings Beat

SM Energy's (SM) third-quarter earnings are likely to have been boosted by higher commodity prices.

This story originally appeared on Zacks

SM Energy Company SM is set to continue its earnings beat streak for third-quarter 2021, whose results are set to be released on Oct 28, after the closing bell.  

- Zacks

In the last reported quarter, the upstream company announced adjusted earnings of 1 penny per share versus the Zacks Consensus Estimate of a loss of 20 cents due to an increase in realized commodity prices, and oil and gas production volumes.

In the trailing four quarters, SM Energy’s earnings beat the Zacks Consensus Estimate thrice and missed the same on another occasion, with the average surprise being 47.5%. This is depicted in the graph below:

SM Energy Company Price and EPS Surprise

SM Energy Company Price and EPS Surprise

SM Energy Company price-eps-surprise | SM Energy Company Quote

Let’s see how things have shaped up prior to this announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter earnings per share of 13 cents has witnessed three upward revisions and one downward movement over the past 60 days. The figure indicates a massive improvement from the year-ago loss of 5 cents per share.

The consensus estimate for third-quarter revenues of $489.3 million indicates a 74.1% increase from the year-ago reported figure.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for SM Energy this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Earnings ESP for the company is currently +34.21%. This is because the Most Accurate Estimate is pegged at 17 cents per share, higher than the Zacks Consensus Estimate of 13 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: SM Energy currently holds a Zacks Rank #1.

Factors Driving the Better-Than-Expected Earnings

Favorable prices of crude oil and natural gas are primarily expected to have positively impacted the bottom line of SM Energy — one of the leading hydrocarbon producers in the Permian Basin and Eagle Ford areas — in the third quarter. The Zacks Consensus Estimate for third-quarter oil price is pegged at $67 per barrel, signaling a massive jump from the year-ago level of $37.69. Also, the same for average natural gas price is pegged at $3.98 per thousand cubic feet, indicating a rise from $1.90 in the year-ago quarter.

The consensus estimate for the company’s third-quarter production is pegged at 142 thousand barrels of oil equivalent per day (MBoe/d), indicating an increase from the year-ago level of 126 MBoe/d. The effects of a significant improvement in oil and natural gas prices along with increased production volumes are expected to have positioned the company for a third-quarter earnings beat.

Other Stocks to Consider

Here are some other companies from the Energy space that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

EQT Corporation EQT has an Earnings ESP of +4.29% and a Zacks Rank of 2. It is scheduled to report third-quarter results on Oct 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

Callon Petroleum Company CPE has an Earnings ESP of +0.50% and is a Zacks #1 Ranked player. The company is scheduled to release third-quarter results on Nov 3.

Continental Resources, Inc. CLR has an Earnings ESP of +2.55% and a Zacks Rank #1. The firm is scheduled to release quarterly earnings on Nov 1.

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EQT Corporation (EQT): Free Stock Analysis Report


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