Up 7% This Year, Will EOG’s Gains Continue Following Q1 Results?

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 first-quarter results on Friday, May 3. We expect EOG stock to likely see little to no movement with revenues beating but earnings falling short of market expectations in the upcoming Q1 results. While Brent crude oil prices have moderated over $84 (at the time of writing), EOG continues to return capital to shareholders, grow cash flows, and drive efficiency gains. In 2023, the company’s operating cash flow stood at $11.3 billion compared to $11.1 billion in full-year 2022. The company’s organic growth strategy and low breakeven costs allow it to generate significant free cash flow. The company generated $5.1 billion of free cash flow and returned more than 85% of that free cash flow to shareholders in 2023. 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. EOG mentioned that it expects capital spending of $6B-$6.4 billion in 2024, even as it plans to operate 27 rigs this year, down from 31 last year. For Q1, the company guided oil production of 483K-490K barrels per day (bbl/day), and total output in the 1M-1.035M barrels of oil equivalent per day (boe/day) range. The company ended 2023 with $7 billion in liquidity and just $3.8 billion in long-term debt.

EOG stock has seen extremely strong gains of 160% from levels of $50 in early January 2021 to around $130 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 $133 per share, in line with the current market price. Look at our interactive dashboard analysis on EOG Resources Earnings Preview: What To Expect in Q1? for more details.

(1) Revenues expected to be slightly ahead of the consensus estimates

Trefis estimates EOG’s Q1 2024 revenues to be around $6 Bil, slightly above the consensus estimate. In Q4, EOG’s revenues fell 5% year-over-year (y-o-y) to $6.4 billion. The company’s total Q4 production increased 13% y-o-y to 1.03 million Boe/day, driven by higher U.S. production. However, the company’s average realized crude oil and condensate price for the quarter fell to $80.60/bbl from $85.67/bbl a year earlier. 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.

(2) EPS likely to miss consensus estimates marginally 

EOG’s Q1 2024 earnings per share (EPS) is expected to be $2.69 as per Trefis analysis, marginally missing the consensus estimate. In Q4, the company’s net income fell to $1.99 billion, or $3.42 per share, from $2.28 billion, or $3.87 per share.

(3) Stock price estimate matches the current market price

Going by our EOG’s Valuation, with an EPS estimate of around $12.06 and a P/E multiple of around 11.0x in fiscal 2024, this translates into a price of nearly $133, which is almost in line with 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.

[1] Returns as of 5/2/2024