U.S. energy operator Diamondback Energy FANG hit a 52-week low of $137.09 on Monday, and investors are wondering if now is the time to buy. The stock has tumbled nearly 12% year to date, lagging the Oil/Energy sector’s 2.1% loss and peers Devon Energy DVN and EOG Resources EOG. Much of this downturn has stemmed from the rollercoaster ride in oil prices this year. WTI crude recently dipped below $70 per barrel—its lowest level since December—while Brent crude followed suit, weighed down by economic concerns and geopolitical tensions.
FANG, DVN, EOG 1 Year Stock Performance
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Yet, there’s a silver lining. Diamondback operates within the Zacks Oil and Gas - Exploration and Production - United States industry, which currently ranks in the top 21% of 248 Zacks Ranked Industries. This suggests that the sector could outperform in the coming months. Additionally, analysts have been revising their earnings expectations upward. Over the past 30 days, the Zacks Consensus Estimate for FANG’s 2025 EPS increased from $15.41 to $15.71, signaling growing confidence in the company’s fundamentals.
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So, does this make Diamondback Energy a buy, or is it still too risky? Let’s break it down.
Earnings Beat Driven by Strong Production
Despite market turbulence, Diamondback posted a solid Q4 earnings beat. The company reported adjusted EPS of $3.64, surpassing the Zacks Consensus Estimate of $3.26. While this figure represents a decline from last year’s $4.74 EPS, the drop was largely due to lower realized oil and gas prices rather than operational inefficiencies.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Revenues were a bright spot, soaring 67% year over year to $3.7 billion, outpacing estimates by 9.2%. This growth was fueled by a 91% increase in total production, reaching 883,424 barrels of oil equivalent per day (BOE/d). Crude oil output climbed 74%, while natural gas and natural gas liquids surged 112% and 118%, respectively.
However, while production grew significantly, Diamondback’s average realized oil price fell to $69.48 per barrel, down 9% year over year. Similarly, natural gas prices tumbled to $0.48 per Mcf from $1.29 per Mcf, though they still came in above analyst expectations.
Diamondback’s Acquisition-Driven Growth Model
One of Diamondback’s biggest strengths is its acquisition-based expansion strategy. The company’s recent $4 billion purchase of Double Eagle and its $26 billion Endeavor acquisition have significantly boosted its Permian Basin presence, adding high-quality assets and reducing operating costs.
With these deals, Diamondback expects to pump between 883,000 and 909,000 BOE/d in 2025, with oil production ranging from 485,000 to 498,000 barrels per day. Additionally, the Endeavor acquisition has pushed the company’s breakeven cost down to $37 per barrel, giving it strong financial resilience even in a weak oil price environment.
The integration of Endeavor’s assets is expected to increase Diamondback’s total oil output significantly, thereby enhancing long-term profitability.
Capital Returns and Balance Sheet Strength
Diamondback has also been returning substantial capital to shareholders. In Q4 2024 alone, the company repurchased $402 million worth of shares, with another $210 million repurchased in Q1 2025. FANG also raised its quarterly dividend by 11% to $1 per share and distributed 51% of its adjusted free cash flow to investors, equating to an annualized shareholder yield of nearly 7%.
Despite aggressive capital returns, Diamondback maintains a strong balance sheet. As of Dec. 31, it had $161 million in cash and $12.1 billion in long-term debt, representing a 30.6 debt-to-capitalization ratio.
Additionally, the company generated $1.4 billion in free cash flow (FCF) in Q4 2024, with expectations of $5.8 billion in FCF in 2025. If oil prices rebound, Diamondback’s projected FCF yield could reach nearly 20% at $85 per barrel, further supporting share buybacks and dividends.
Risks to Consider
While Diamondback’s long-term outlook is strong, there are several risks that investors should keep in mind:
Oil Price Volatility: Despite low breakeven costs, Diamondback’s profitability is highly dependent on oil prices. If crude falls below $50 for an extended period, its cash flow could take a hit.
High Capital Expenditures: The company is spending $4 billion in capex for 2025, including $415 million on midstream infrastructure and $60 million on environmental initiatives. While these investments support growth, they could pressure short-term free cash flow.
Debt Load & Shareholder Overhang: The Endeavor deal has increased Diamondback’s long-term debt to more than $12 billion. Additionally, Endeavor shareholders now hold 36% of FANG stock, and as their lock-up periods expire in 2025-2026, selling pressure could weigh on share prices.
Integration Risks: Large-scale acquisitions often come with execution challenges. If expected synergies from the Double Eagle and Endeavor deals take longer to materialize, margins and cash flow could be impacted.
Valuation: Is FANG a Bargain?
Diamondback Energy's stock is attractively valued, trading at a multiple of 7.94 based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization). This is around 16% lea than its 10-year average and compares favorably to its subindustry. The company has a Zacks Value Score of B.
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Final Verdict: Hold for Now
Diamondback Energy’s stock decline presents an interesting opportunity, but given the near-term headwinds, it’s best viewed as a Zacks Rank #3 (Hold) for now. The company has a strong growth outlook, a robust acquisition strategy, and shareholder-friendly capital returns, but oil price volatility, integration risks, and potential selling pressure from Endeavor shareholders create short-term uncertainty.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For investors willing to ride out the turbulence, Diamondback remains a high-quality name in the Permian Basin with significant long-term upside. But in the short run, a wait-and-see approach might be prudent.
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