It has been about a month since the last earnings report for Pioneer Natural Resources (PXD). Shares have lost about 10% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Pioneer Natural Resources due for a breakout? 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.

Pioneer Natural Q2 Earnings Lags Estimates, Rises Y/Y

Pioneer Natural Resources reported second-quarter 2018 earnings of $1.41 per share, excluding one-time items, which missed the Zacks Consensus Estimate of $1.54. The bottom line improved from 21 cents in the year-ago quarter.  
 
Revenues and other income in the quarter surged 29.5% year over year to $2,111 million from $1,630 million. However, the top line missed the Zacks Consensus Estimate of $2,233 million.

Higher oil and liquids price realizations as well as increased production supported second-quarter results. This was partially offset by higher expenses.

Production

Total production in the reported quarter averaged 327.7 thousand barrels of oil equivalent per day (MBOE/d), which improved 26.5% year over year and beat the Zacks Consensus Estimate of 320 MBOE/d. The upside can be attributed to the Permian Basin drilling program.

Oil production averaged 185.5 thousand barrels per day (MBbl/d), up 26.3% year over year but below the Zacks Consensus Estimate of 189 MBbl/d. Natural gas liquids (NGLs) production jumped 21% year over year to 64.5MBbl/d, but lagged the Zacks Consensus Estimate of 66 MBbl/d. Natural gas productions amounted to 466.4 million cubic feet per day (MMcf/d), up from the year-ago quarter’s level of 353.6MMcf/d. The figure beat the Zacks Consensus Estimate of 388 MMcf/d.   

Price Realization

On an oil equivalent basis, average realized price was $43.12 per barrel in the reported quarter compared with $32.56 a year ago. The figure missed the Zacks Consensus Estimate of $46.15. The average realized price for oil was $61.20 a barrel compared with $45 in second-quarter 2017.    

Average natural gas price dropped 24.8% year over year to $1.97 per thousand cubic feet (Mcf). Natural gas liquids were sold at $28.83 a barrel, up from $16.91 in the year-ago quarter.

Cash, Debt and Capex

At the end of the quarter under review, cash balance was $792 million. Long-term debt totaled $2,285 million, reflecting a debt-to-capitalization ratio of 16.6%.      

Guidance

Pioneer Natural expects Permian basin production between 278 MBOE/d and 288 MBOE/d in the third quarter of 2018. Moreover, the company expects 2018 production from the prolific Permian Basin to surge 19-24% from the year-ago level. For the third quarter, the company expects production costs in the range of $9.50-$11.50 per BOE. General and administrative expenses are expected in the range of $95-$100 million.

For 2018, Pioneer intends to spend $3.3-$3.4 billion.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Pioneer Natural Resources has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Pioneer Natural Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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