Why Is Diamondback (FANG) Up 7.8% Since Last Earnings Report?

Diamondback Energy (FANG) shares have risen 7.8% since its last earnings report, outperforming the S&P 500; however, consensus estimates have since trended downward by 12.4%, leading to a Zacks Rank #3 (Hold) and expectations of an in-line return in the coming months. In comparison, Range Resources (RRC), a peer in the same industry, has gained 11.5% over the past month, with revenues up 18.9% year-over-year and a 1.4% positive change in Zacks Consensus Estimate over the last 30 days, also resulting in a Zacks Rank #3 (Hold).

Analysis

Diamondback Energy (FANG) shares have appreciated 7.8% since its last earnings report, outperforming the S&P 500, yet this rally occurred amidst a significant 12.4% downward revision in its consensus earnings estimates over the past month. This divergence is underscored by Diamondback's weak 'F' Momentum Score and 'C' Growth Score, although its 'B' Value Score contributes to an overall 'C' VGM Score and a Zacks Rank #3 (Hold), suggesting an expected in-line market return in the near term. In contrast, industry peer Range Resources (RRC) gained 11.5% over the past month, bolstered by a reported 18.9% year-over-year revenue increase to $854.02 million and an EPS of $0.96 in its last reported quarter, up from $0.69 a year prior. Range Resources also benefits from a +1.4% upward revision in its Zacks Consensus Estimate over the last 30 days and projects a 47.8% year-over-year EPS growth to $0.68 for the current quarter, supporting its 'A' VGM Score, though it also holds a Zacks Rank #3 (Hold).

Key Decisions for Investors

• Investors should exercise caution with Diamondback Energy due to the significant downward trend in earnings estimates, which contrasts with its recent stock price increase, and closely monitor upcoming estimate revisions for any signs of stabilization.
• Evaluate Diamondback's current 'B' Value score against its deteriorating 'C' Growth and 'F' Momentum scores and negative earnings estimate revisions before initiating or adding to positions, as a pullback remains a possibility.
• For investors seeking exposure to the U.S. Exploration and Production sector, Range Resources may warrant closer examination given its positive estimate revisions, stronger recent financial performance, and superior 'A' VGM score, despite both companies currently holding a Zacks #3 (Hold) rating.