A month has gone by since the last earnings report for Magnolia Oil & Gas Corp (MGY). Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Magnolia Oil & Gas Corp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Magnolia Q3 Earnings Beat Estimates
Magnolia Oil & Gas reported a third-quarter 2024 net profit of 52 cents per share, which beat the Zacks Consensus Estimate of 48 cents. This outperformance can be attributed to a healthy increase in production volumes. However, the bottom line deteriorated from the year-ago quarter’s 54 cents, due to a 21.9% increase in operating expenses year over year.
The oil and gas exploration and production company’s total revenues were $333.1 million, which beat the Zacks Consensus Estimate of $331 million. The top line increased 5.5% from $315.7 million recorded in the year-ago period due to higher-than-expected revenues from oil. The total oil revenues reached $266 million, surpassing the consensus estimate of $259 million.
In the quarter under review, the company recorded $217.9 million in net cash from operating activities and achieved a free cash flow of $126.1 million. Magnolia’s operating income was 39% of revenues.
In the third quarter, the company repurchased 2.5 million shares of its Class A and Class B common stock for $61.7 million. Magnolia still has 3.9 million Class A common shares available under its current repurchase authorization, which are designated for open market buybacks.
In the third quarter, MGY returned about $87.8 million to its shareholders—representing 70% of the company’s free cash flow—through a mix of share repurchases and dividends.
Production & Prices
The average daily total output of 90,702 barrels of oil equivalent per day (boe/d) increased from the year-ago quarter’s 82,651 boe/d. However, the figure missed our estimate of 91,000 boe/d. Oil and gas production increased 10.2% year over year.
Oil volumes totaled 38,902 barrels per day (bpd), up 18.4% from the year-ago quarter’s level. The figure exceeded our estimate of 37,200 bpd. Natural gas volumes reached 159,170 thousand cubic feet per day (Mcf/d), up 1.7% from the third quarter of 2023. The figure missed our expectations of 173,600 Mcf/d. The average realized crude oil price was $74.23 per barrel, indicating a 7.9% decrease from the year-ago period’s $80.56. The figure also missed our expectations of $75.21 per barrel.
The average realized natural gas liquids price was $19.46 per barrel, implying a 5.8% decrease from the year-ago period’s figure. However, natural gas prices decreased 19.1% year over year to $1.52 per thousand cubic feet. MGY recorded an average sales price of $39.92 per boe compared with $41.52 a year ago.
Balance Sheet & Capital Expenditure
As of Sept. 30, Magnolia had cash and cash equivalents of $276.1 million and long-term debt of $394.8 million. The total debt-to-total capital was 16.8%.
The company spent $103.1 million on its capital program in the reported quarter. Operating expenses increased to $204.1 million from $167.5 million in the year-ago period.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Magnolia Oil & Gas Corp has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. Notably, Magnolia Oil & Gas Corp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Magnolia Oil & Gas Corp is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, Range Resources (RRC), a stock from the same industry, has gained 18.5%. The company reported its results for the quarter ended September 2024 more than a month ago.
Range Resources reported revenues of $680.17 million in the last reported quarter, representing a year-over-year change of +4.8%. EPS of $0.48 for the same period compares with $0.46 a year ago.
For the current quarter, Range Resources is expected to post earnings of $0.51 per share, indicating a change of -19.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.9% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Range Resources. Also, the stock has a VGM Score of D.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
