Why Is Southwestern Energy (SWN) Up 14.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Southwestern Energy (SWN). Shares have added about 14.9% in that time frame, outperforming the S&P 500.

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

Southwestern Q2 Earnings Beat Estimates, Revenues Miss

Southwestern Energyreported break-even earnings for second-quarter 2020, comparing favorably with the Zacks Consensus Estimate of a loss of 3 cents. In the year-ago quarter, the company reported earnings of 8 cents per share.

Quarterly operating revenues of $410 million missed the Zacks Consensus Estimate of $565 million and declined from $667 million in second-quarter 2019.

The earnings beat was supported by higher gas equivalent production, partially offset by lower average realized commodity prices.

Higher Total Production

The company’s total second-quarter production increased to 201 billion cubic feet equivalent (Bcfe) from 186 Bcfe a year ago. Gas production in the quarter was 158 Bcf compared with the year-ago level of 148 Bcf.

Moreover, oil production surged to 1,083 thousand barrels (MBbls) from 937 MBbls in the year-ago quarter. Natural gas liquids production in the quarter under review was recorded at 6,111 MBbls, higher than the year-ago level of 5,497 MBbls. It is to be noted that almost 78.6% of its volume mix constituted of natural gas.

Lower Average Realized Prices

The company’s average realized gas price in the quarter, excluding derivatives, fell to 98 cents per thousand cubic feet (Mcf) from $1.80 a year ago. Oil was sold at $15.69 per barrel compared with the year-earlier level of $49.55. Natural gas liquids were sold at $6.43 per barrel, lower than $10.51 in the year-ago period.

Expenses

On a per-Mcfe basis, lease operating expenses were 91 cents compared with the prior-year level of 90 cents. However, general and administrative expenses per unit of production were 14 cents, down from 19 cents in the year-ago quarter.

Financials

Southwestern’s total capital investment during the second quarter was $115 million. As of Jun 30, 2020, the company’s cash and cash equivalents were $10 million. Long-term debt was $2,440 million, which represents a debt-to-capitalization ratio of 0.75.

Guidance

The upstream energy player expects production volumes in 2020 in the range of 843 to 861Bcfe. For 2020, the company has set a capital budget of $860 to $915 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 233.33% due to these changes.

VGM Scores

At this time, Southwestern Energy has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Southwestern Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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