Is Range Resources' Rally Justified after Its 1Q16 Earnings?
Range Resources’ 1Q16 earnings miss estimates
Range Resources (RRC) announced its 1Q16 earnings on April 28, 2016, after the market closed. RRC reported an adjusted loss of $0.55 per share, $0.36 lower than Wall Street analysts’ consensus for a loss of $0.19 per share.
Range Resources’ 1Q16 earnings are lower by $0.71 per share, when compared with its 1Q15 profit of $0.16 per share. Even when compared sequentially with 4Q15, Range Resources’ 1Q16 earnings are lower by $0.80 per share.
Range Resources’ 1Q16 revenues beat estimates
For 1Q16, RRC reported adjusted revenues of ~$331 million, ~4% higher than analysts’ consensus for revenues of ~$318 million. Range Resources’ 1Q16 revenues are lower by ~24% when compared with 1Q15 revenues of ~$437 million. Even when compared sequentially with 4Q15, RRC’s 1Q16 revenues are lower by ~19%.
RRC’s earnings trend
As seen in the above chart, Range Resources reported much lower earnings in 2015 due to lower realized natural gas (UNG) (UGAZ) (BOIL) prices. In 3Q15, RRC saw its adjusted earnings turn negative for the first time since 1Q13. Since 1Q13, RRC beat the earnings expectations ~54% of the time.
Due to the steep downward trend in energy prices, upstream companies Memorial Resource Development (MRD), WPX Energy (WPX), Ultra Petroleum (UPL), and EV Energy Partners (EVEP) have reported respective ~7%, ~19%, ~35%, and ~32% year-over-year declines in their 4Q15 adjusted revenues.
In 4Q15, Memorial Resource Development, WPX Energy, and EV Energy Partner reported a production mix that contains at least 60% natural gas. The SPDR S&P Oil and Gas Exploration & Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies. The Energy Select Sector SPDR ETF (XLE) generally invests at least 95% of its total assets in oil and gas companies.
In this series
Having analyzed Range Resources’1Q16 earnings performance, we will also look at RRC’s operational performance, Wall Street analysts’ ratings, and how Range Resources’ stock price reacted to past earnings beats.
Next, let’s take a look at RRC’s operational performance for 1Q16.
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