Benchmark reaffirmed its Buy recommendation and maintained a $195.00 price target on Diamondback Energy (NASDAQ:FANG) following the company's fourth-quarter financial report.
The company reported adjusted EBITDA of $2.021 billion for the quarter, below both the consensus estimate of $2.19 billion and Benchmark's internal forecast of $2.14 billion. Earnings per share for the period came in at $1.74, short of the $2.41 analysts had forecast. Revenue for the quarter was reported at $3.38 billion, versus expected revenue of $3.43 billion.
Market data indicate that 19 analysts have revised their earnings estimates downward for the upcoming period. The stock trades at a price-to-earnings ratio of 11.88 and carries a market capitalization of $47.81 billion.
Operational metrics provided a mixed picture. Oil volumes landed at the high end of Diamondback's guidance range and matched Benchmark's volume expectations. Reported EBITDA margins were 68%, slightly under Benchmark's estimate of 69%.
Benchmark noted cash costs ran a touch higher than the firm had forecast, with the deviation attributed in part to the fourth-quarter sale of Diamondback's water handling business. Management had pre-announced realization figures prior to the earnings release.
Despite the earnings shortfall, Benchmark analyst Subash Chandra left the firm's positive stance intact. Analysis referenced alongside the earnings results indicates the stock may still be undervalued; shares were trading near a 52-week high of $177.25 even after the quarterly miss. There were no reported updates concerning mergers or acquisitions tied to the company, and analysts' ratings did not show any upgrades or downgrades in direct response to the quarter.
Following the release of the results, Diamondback's share price experienced a slight decline. The report and subsequent market reaction provide investors with a blend of signals - production strength in line with guidance on one hand, and financial metrics that fell shy of consensus on the other.
What this means for markets
The results and associated analyst commentary are relevant to equity investors tracking the oil and gas sector, credit markets watching cash-cost dynamics, and commodity-focused portfolios that price in production and margin outcomes. The juxtaposition of near-guidance operational performance with softer earnings figures is likely to influence short-term trading and valuation discussions among investors.