SM Energy Company (SM) Is a Trending Stock: Facts to Know Before Betting on It

SM Energy (SM) is trending on Zacks.com, with shares up 3.2% over the past month, lagging both the S&P 500 and its industry. Despite strong revenue growth, with the last quarter showing a 50.8% year-over-year increase, earnings estimates have been revised downward, leading to a Zacks Rank #5 (Strong Sell) rating, suggesting potential near-term underperformance; however, the stock receives an 'A' grade for value, indicating it may be trading at a discount relative to its peers.

Analysis

SM Energy (SM) has recently garnered investor attention, though its stock performance of +3.2% over the past month trails both the S&P 500 composite's +6.3% gain and its Zacks Oil and Gas - Exploration and Production - United States industry's +6.8% increase. A critical factor influencing its outlook is the revision in earnings estimates: the current quarter's earnings are projected at $1.24 per share, a significant 33% year-over-year decline, with the Zacks Consensus Estimate for this period decreasing by 3.3% in the last 30 days. Similarly, the current fiscal year's consensus EPS of $5.67 indicates a 16.6% decrease from the prior year, although this estimate has seen a slight +0.3% upward revision recently. The next fiscal year's EPS is anticipated at $5.56, a 1.9% decrease. These estimate revisions contribute to SM Energy's Zacks Rank #5 (Strong Sell), suggesting potential near-term underperformance. Conversely, the company exhibits strong revenue growth, with the last reported quarter's revenue up 50.8% year-over-year to $844.54 million, surpassing estimates. Projected sales for the current quarter are $777.04 million (+22.5% YoY), and for the current fiscal year, $3.24 billion (+20.6% YoY). Despite the challenging earnings outlook, SM Energy scores an 'A' on the Zacks Value Style Score, indicating it may be trading at a discount relative to its peers.

Key Decisions for Investors

• Investors should exercise caution due to SM Energy's Zacks Rank #5 (Strong Sell) and the significant projected year-over-year decline in current quarter earnings by 33%, which signals potential near-term underperformance.
• Monitor upcoming earnings reports to see if the company can convert its strong projected revenue growth, such as the +22.5% expected for the current quarter, into a reversal of the negative earnings estimate trends.
• Consider the stock's 'A' grade for value as a potential long-term opportunity, but weigh this against the current negative earnings momentum and bearish analyst sentiment before initiating or adding to positions.