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After reading Hess Corporation’s (NYSE:HES) latest earnings update (31 December 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether HES has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. See our latest analysis for Hess
Commentary On HES’s Past Performance
For the most up-to-date info, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to assess various companies on a more comparable basis, using the latest information. For Hess, its latest trailing-twelve-month earnings is -US$4.12B, which compared to last year’s figure, has become less negative. Given that these figures are somewhat nearsighted, I have calculated an annualized five-year figure for HES’s net income, which stands at -US$165.07M. This means Hess has historically performed better than recently, even though it seems like earnings are now heading back towards to right direction again.
We can further evaluate Hess’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Hess has seen an annual decline in revenue of -31.46%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 25.67% over the previous year, . This is a turnaround from a volatile drop of -8.71% in the last couple of years. This means that, although Hess is currently running a loss, it may have only just benefited from the recent industry expansion, moving earnings into a more favorable position.
What does this mean?
Hess’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always hard to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues Hess may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Hess to get a more holistic view of the stock by looking at: