Down 13% Since 2023, Will EOG Stock Recoup These Losses After Q4 Results?

-4.59%
Downside
135
Market
129
Trefis
EOG: EOG Resources logo
EOG
EOG Resources

EOG Resources (NYSE: EOG), an energy company engaging in the exploration, development, production, and marketing of crude oil and natural gas, is scheduled to announce its fiscal fourth-quarter results on Friday, February 23. We expect EOG stock to likely trade higher with revenues and earnings beating market expectations in the upcoming Q4 results. While oil and gas prices have moderated over the past 18 months, EOG continues to return capital to shareholders, grow cash flows, and drive efficiency gains. As of Q3 2023 (TTM), the company’s operating cash flow stood at $11.7 billion compared to $11.1 billion in full-year 2022. Similarly, its free cash flow came in at $5.7 billion in Q3 (TTM), compared to $6.1 billion in full-year 2022. Because of the strong returns that EOG receives from its capital investments, they are committed to returning 70% of its annual free cash flow to shareholders. The company is also expecting attractive production growth when it reports its full-year results, with total production forecast between 971.9K-992.1K barrels of oil equivalent per day (boe/day). EOG has unveiled its Utica Shale Combo Play and suggests that it has similar potential to many of its prospects in the Permian. In 2024, EOG expects to continue drilling in its core plays as well as in the Dorado and Utica. There will likely be a small increase in well numbers and production, as well as a modest decrease in well costs.

EOG stock has seen extremely strong gains of 130% from levels of $50 in early January 2021 to around $115 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. However, the increase in EOG stock has been far from consistent. Returns for the stock were 78% in 2021, 46% in 2022, and -7% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that EOG underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Energy sector including XOM, CVX, and COP, and even for the megacap stars GOOG, TSLA, and MSFT.
In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could EOG face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that EOG’s valuation is around $129 per share, 13% higher than the current market price. Look at our interactive dashboard analysis on EOG Resources Earnings Preview: What To Expect in Q4? for more details.

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(1) Revenues expected to be slightly above the consensus estimates

Trefis estimates EOG’s Q4 2023 revenues to be around $6.4 Bil, slightly above the consensus estimate. In Q3, EOG’s revenues fell 18% year-over-year (y-o-y) to $6.2 billion. The company’s total production increased 8.5% y-o-y to 998.5K Boe/day, driven by higher U.S. production. The quarter’s crude oil and condensate production totaled 483.3K bbl/day, up 4% from the year-ago level. Natural gas liquids volumes increased by 10% yearly to 231.1K bpd, and natural gas volume rose 16% to $1.7 billion cubic feet/day. EOG Resources produces oil and gas from its U.S. shale assets. The production from the U.S. comes from five basins: Bakken, Powder River, Wyoming DJ, Delaware, and Eagle Ford.

Higher production has been swamped by lower commodity prices though.

(2) EPS likely to beat consensus estimates marginally 

EOG’s Q4 2023 earnings per share (EPS) is expected to be $3.10 as per Trefis analysis, marginally beating the consensus estimate. In Q3, the company’s net income of $2.03 billion, or $3.48/share, was only little changed from $2.02 billion, or $3.45/share, in the year-ago quarter but jumped 30% from $1.55 billion, or $2.66/share, reported in Q2 2023.

(3) Stock price estimate higher than the current market price

Going by our EOG’s Valuation, with an EPS estimate of around $11.86 and a P/E multiple of around 10.9x in fiscal 2023, this translates into a price of nearly $129, which is 13% higher than the current market price.

It is helpful to see how its peers stack up. EOG Resources Peers shows how EOG stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

 Returns Feb 2024
MTD [1]
Since start
of 2023 [1]
2017-24
Total [2]
 EOG Return -1% -13% 12%
 S&P 500 Return 3% 30% 124%
 Trefis Reinforced Value Portfolio 2% 40% 619%

[1] Returns as of 2/21/2024
[2] Cumulative total returns since the end of 2016

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