Can Diamondback Energy’s Stock Price Keep Rallying after Its 1Q16 Results?
Diamondback Energy's 1Q16 Earnings: The Start of a New Uptrend?
Stock price action
Diamondback Energy (FANG) announced its 1Q16 earnings on May 3, 2016, after the market closed. Following the announcement, we saw a contrarian reaction, and despite FANG’s better-than-expected earnings, its stock price decreased by ~2% the next day.
We should note that in the three months leading up to its latest earnings release, FANG’s stock price had already increased by a whopping ~52%, mainly due to the ~58% bounce in crude oil (USO) (SCO) (DWTI) prices during the same period.
Stock price trends
Falling crude oil (UCO) and natural gas (UGAZ) prices over the last two years have led to a falling trend in the entire upstream sector. FANG was no exception. But since January 2016, the stock has been in a new uptrend and is clearly making a pattern of higher highs and higher lows.
Relative performance
So far in 2016, FANG is outperforming other upstream companies, having gained ~32% YTD (year-to-date). Carrizo Oil & Gas (CRZO), Antero Resources (AR), and QEP Resources (QEP), by comparison, have only risen by ~12%, ~19%, and ~29%, respectively.
In the past year, there were three occasions—in 4Q15, 3Q15, and 2Q15—when FANG beat its earnings expectations. FANG’s 4Q15 post-earnings reaction was positive, rising by ~15% in the following four weeks after beating estimates by $0.14 per share.
We saw similarly positive reactions after FANG’s 3Q15 and 2Q15 earnings releases, when the stock’s price increased by ~5% and ~8% in the following two weeks, after beating estimates by $0.08 per share and $0.04 per share, respectively.
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