Permian producer Diamondback Energy (FANG) has reported weaker-than-expected first quarter earnings results, with revenue of $899M (+4.1% Y/Y) falling short of Street estimates by $69.57M.
Meanwhile GAAP EPS of -$1.72 missesd by $2.97, but non-GAAP EPS of $1.45 beat by $0.15. Total capital spending of $790 million was well above the consensus $710 million forecast. FANG also revealed that it is curtailing 10-15% of production in May.
However FANG’s 1Q20 dividend was declared and unchanged at $0.375/share- and there were no material changes to the 2020 guidance. Plus production of 321.1 Mboe/d (201.4 Mb/d oil) beat the 307 Mboe/d (198 Mb/d oil) consensus estimate. Shares were trading marginally higher in after-hours trading on Monday.
“Cadence of spending was a bit heavy in 1Q20 and could persist into early 2Q20 but our conversations with management indicated confidence in the existing capital 2020 outlook” commented RBC Capital analyst Scott Hanold following the earnings release.
He notes that 1Q20 CFPS (cash flow per share) was light by 3% due to slightly lower natural gas liquids and natural gas prices, and higher accrued severance taxes.
However, Hanold reiterates his buy rating on the stock, writing “We believe FANG has one of the lowest cost structures in the basin and a corporate cash flow break-even (including dividend) that is among the best in the industry.”
Overall, the Street shares Hanold’s bullish outlook on Diamondback. FANG scores a Strong Buy Street consensus with 18 recent buy ratings vs just 3 hold ratings. With a 54% year-to-date plunge, the $55 average analyst price target now indicates 30% upside potential from current levels. (See Diamondback stock analysis on TipRanks).