Diamondback Energy Faces EPS Decline Amid Market Resilience
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 03 2024
0mins
Should l Buy FANG?
Diamondback Energy Inc (FANG) experienced a price drop of 5.56%, hitting a 20-day low, as the stock closed at $151.25. This decline occurred despite the Nasdaq-100 rising by 1.00% and the S&P 500 gaining 0.66%, indicating a potential sector rotation.
The expected EPS decline of 31.59% year-over-year, alongside a projected revenue drop of 9.04%, raises concerns about profitability and future growth. These factors contribute to investor caution, suggesting that the stock's performance is being influenced by broader market conditions rather than company-specific news.
As Diamondback Energy navigates these challenges, investors will be closely monitoring upcoming earnings reports and market trends to gauge the company's ability to recover and maintain investor confidence.
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Analyst Views on FANG
Wall Street analysts forecast FANG stock price to rise
19 Analyst Rating
18 Buy
1 Hold
0 Sell
Strong Buy
Current: 168.590
Low
158.00
Averages
180.94
High
218.00
Current: 168.590
Low
158.00
Averages
180.94
High
218.00
About FANG
Diamondback Energy, Inc. is an independent oil and natural gas company, focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. The Company's activities are primarily directed at the horizontal development of the Wolfcamp and Spraberry formations in the Midland Basin and the Wolfcamp and Bone Spring formations in the Delaware Basin within the Permian Basin. Its subsidiary, Viper Energy, Inc., is focused on owning and acquiring mineral interests and royalty interests in oil and natural gas properties primarily in the Permian Basin and derives royalty income and lease bonus income from such interests. The Company has approximately 859,203 net acres, which primarily consists of 742,522 net acres in the Midland Basin and 116,681 net acres in the Delaware Basin. Its subsidiaries include Diamondback E&P LLC, Rattler Midstream GP LLC, Rattler Midstream LP and QEP Resources, Inc.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Comparative Analysis of ConocoPhillips and Diamondback Energy
- Production and Cash Flow: ConocoPhillips averages over 2.3 million barrels of oil equivalent per day and expects to generate an additional $1 billion in annual free cash flow by 2028, showcasing its strong resource base and cash generation capability to support shareholder returns and reinvestment.
- Investment Strategy Differences: ConocoPhillips demonstrates greater long-term growth visibility through a diversified portfolio, including three LNG projects and the Willow oil project in Alaska, while Diamondback Energy relies on short-cycle investments in the Permian Basin, adjusting capital spending flexibly in response to oil price fluctuations.
- Free Cash Flow Performance: Diamondback Energy generates over $6.1 billion in annual free cash flow at $70 oil, utilizing this cash flow to repay debt, buy back shares, and pay dividends, reflecting its competitive advantage in a low-cost region.
- Market Environment Impact: Currently, Diamondback Energy operates in a
See More
Comparative Analysis of ConocoPhillips and Diamondback Energy
- Cash Flow Growth Potential: ConocoPhillips, with production averaging over 2.3 million barrels of oil equivalent per day, expects to generate an additional $1 billion in annual free cash flow by 2028, reaching a $4 billion inflection point in 2029, indicating strong growth potential to support dividend increases.
- Diversified Investment Strategy: ConocoPhillips engages in diversified investments across the U.S. and globally, including LNG and the Willow oil project in Alaska, balancing short-term and long-term investments, which enhances its market competitiveness and risk resilience.
- Flexibility of Diamondback Energy: Operating exclusively in the Permian Basin, Diamondback Energy produces around 920,000 BOE/d and generates over $6.1 billion in annual free cash flow, allowing it to adjust capital spending flexibly in response to oil price fluctuations.
- Market Environment Impact: Currently in a
See More
Verde Suspends Permian Basin Project Development Amid Market Changes
- Project Suspension Reason: Verde Clean Fuels, Inc. announced the suspension of its Permian Basin project development primarily due to changing market conditions, particularly the increasing demand for natural gas in the region, indicating the company's responsiveness to market dynamics.
- Joint Development Agreement Context: In February 2024, Verde entered into a joint development agreement with Cottonmouth Ventures, a wholly-owned subsidiary of Diamondback Energy, to develop a natural gas-to-gasoline plant utilizing Verde's STG+® technology, although the project is now on hold, the partnership remains strong.
- Future Technology Applications: Despite the suspension of the Permian Basin project, Verde plans to redirect resources towards other regions where natural gas is stranded or flared, continuing to explore opportunities for deploying its technology, showcasing the company's strategic flexibility in the clean fuels sector.
- Shareholder Support: Cottonmouth remains Verde's second-largest shareholder and supports the company's ongoing efforts to deploy its technology, reflecting shareholder confidence in the company's future and the importance of transitioning to clean energy.
See More
Diamondback Energy Stock Breakout
- Shareholder Return Commitment: Diamondback Energy is committed to returning at least 50% of quarterly free cash flow to shareholders, having returned $892 million through dividends and share buybacks by Q3, showcasing strong cash flow management.
- Stable Dividend Growth: Since initiating its dividend in 2018, FANG has grown its payout by 7.2% annually, currently offering a 2.42% annual yield, alongside an $8 billion share buyback authorization, reflecting the company's ongoing commitment to shareholders.
- Cost Structure Advantage: With a breakeven price of $30 per barrel and a dividend maintenance price of $37, significantly below the current $65 oil price, FANG demonstrates its ability to remain profitable even in low oil price environments, enhancing its competitive edge.
- Strong Technicals: FANG trades above both the 50-day and 200-day moving averages, indicating robust upward momentum, with the next key resistance around $170-$172; a breakout here would further solidify its market position.
See More
US Stocks Close Higher on Strong Manufacturing Data
- Manufacturing Index Surge: The US January ISM manufacturing index rose by 4.7 to 52.6, surpassing expectations of 48.5, marking the strongest expansion in over 3.25 years, which bolstered market optimism and contributed to stock gains.
- Chip Stocks Rally: Chipmakers and AI infrastructure stocks performed strongly on Monday, with Sandisk (SNDK) surging over 15% to lead the S&P 500 gainers, reflecting strong demand for tech stocks and a recovery in investor confidence.
- Energy Stocks Under Pressure: Energy producers faced headwinds as WTI crude oil prices fell more than 4%, with Diamondback Energy (FANG) and Occidental Petroleum (OXY) both declining over 3%, indicating growing concerns in the energy sector.
- Cryptocurrency Market Retreats: Bitcoin plummeted over 7% to a 9.75-month low, leading to widespread declines in cryptocurrency-related stocks, with Galaxy Digital Holdings (GLXY) and Strategy (MSTR) both dropping over 6%, reflecting weakened investor confidence in the crypto market.
See More
Goldman Sachs and Broadcom Investment Outlook Positive
- Goldman Sachs Advisory Role: Goldman Sachs has been appointed as the financial advisor for Coterra's $58 billion all-stock merger with Devon, marking the largest deal in the energy sector since Diamondback's $26 billion acquisition of Endeavor in 2024, thereby reinforcing Goldman's position in investment banking, which accounted for 15% of its overall revenue last year.
- M&A Activity Boost: CEO David Solomon stated that M&A transactions often trigger a flywheel of activity across the entire franchise, and the ongoing deal news further validates the initial bullish thesis on Goldman’s stock, which has risen 7.6% year-to-date, significantly outperforming the S&P 500's 1.5% increase.
- Broadcom Earnings Potential: Mizuho analysts recommend buying Broadcom on its recent pullback, citing an acceleration in earnings potential from multiple custom chip business opportunities in the coming year, despite Broadcom shares being down nearly 20% from their December peak, indicating strong growth prospects ahead.
- Price Target and Rating: Mizuho maintains a buy-equivalent rating on Broadcom with a price target of $480, implying a 44% upside from the current price of around $332, although the investment club prefers to wait for a further pullback before upgrading its rating to buy.
See More
Comparative Analysis of ConocoPhillips and Diamondback Energy
- Production and Cash Flow: ConocoPhillips averages over 2.3 million barrels of oil equivalent per day and expects to generate an additional $1 billion in annual free cash flow by 2028, showcasing its strong resource base and cash generation capability to support shareholder returns and reinvestment.
- Investment Strategy Differences: ConocoPhillips demonstrates greater long-term growth visibility through a diversified portfolio, including three LNG projects and the Willow oil project in Alaska, while Diamondback Energy relies on short-cycle investments in the Permian Basin, adjusting capital spending flexibly in response to oil price fluctuations.
- Free Cash Flow Performance: Diamondback Energy generates over $6.1 billion in annual free cash flow at $70 oil, utilizing this cash flow to repay debt, buy back shares, and pay dividends, reflecting its competitive advantage in a low-cost region.
- Market Environment Impact: Currently, Diamondback Energy operates in a
See More
Comparative Analysis of ConocoPhillips and Diamondback Energy
- Cash Flow Growth Potential: ConocoPhillips, with production averaging over 2.3 million barrels of oil equivalent per day, expects to generate an additional $1 billion in annual free cash flow by 2028, reaching a $4 billion inflection point in 2029, indicating strong growth potential to support dividend increases.
- Diversified Investment Strategy: ConocoPhillips engages in diversified investments across the U.S. and globally, including LNG and the Willow oil project in Alaska, balancing short-term and long-term investments, which enhances its market competitiveness and risk resilience.
- Flexibility of Diamondback Energy: Operating exclusively in the Permian Basin, Diamondback Energy produces around 920,000 BOE/d and generates over $6.1 billion in annual free cash flow, allowing it to adjust capital spending flexibly in response to oil price fluctuations.
- Market Environment Impact: Currently in a
See More
Verde Suspends Permian Basin Project Development Amid Market Changes
- Project Suspension Reason: Verde Clean Fuels, Inc. announced the suspension of its Permian Basin project development primarily due to changing market conditions, particularly the increasing demand for natural gas in the region, indicating the company's responsiveness to market dynamics.
- Joint Development Agreement Context: In February 2024, Verde entered into a joint development agreement with Cottonmouth Ventures, a wholly-owned subsidiary of Diamondback Energy, to develop a natural gas-to-gasoline plant utilizing Verde's STG+® technology, although the project is now on hold, the partnership remains strong.
- Future Technology Applications: Despite the suspension of the Permian Basin project, Verde plans to redirect resources towards other regions where natural gas is stranded or flared, continuing to explore opportunities for deploying its technology, showcasing the company's strategic flexibility in the clean fuels sector.
- Shareholder Support: Cottonmouth remains Verde's second-largest shareholder and supports the company's ongoing efforts to deploy its technology, reflecting shareholder confidence in the company's future and the importance of transitioning to clean energy.
See More
Diamondback Energy Stock Breakout
- Shareholder Return Commitment: Diamondback Energy is committed to returning at least 50% of quarterly free cash flow to shareholders, having returned $892 million through dividends and share buybacks by Q3, showcasing strong cash flow management.
- Stable Dividend Growth: Since initiating its dividend in 2018, FANG has grown its payout by 7.2% annually, currently offering a 2.42% annual yield, alongside an $8 billion share buyback authorization, reflecting the company's ongoing commitment to shareholders.
- Cost Structure Advantage: With a breakeven price of $30 per barrel and a dividend maintenance price of $37, significantly below the current $65 oil price, FANG demonstrates its ability to remain profitable even in low oil price environments, enhancing its competitive edge.
- Strong Technicals: FANG trades above both the 50-day and 200-day moving averages, indicating robust upward momentum, with the next key resistance around $170-$172; a breakout here would further solidify its market position.
See More
US Stocks Close Higher on Strong Manufacturing Data
- Manufacturing Index Surge: The US January ISM manufacturing index rose by 4.7 to 52.6, surpassing expectations of 48.5, marking the strongest expansion in over 3.25 years, which bolstered market optimism and contributed to stock gains.
- Chip Stocks Rally: Chipmakers and AI infrastructure stocks performed strongly on Monday, with Sandisk (SNDK) surging over 15% to lead the S&P 500 gainers, reflecting strong demand for tech stocks and a recovery in investor confidence.
- Energy Stocks Under Pressure: Energy producers faced headwinds as WTI crude oil prices fell more than 4%, with Diamondback Energy (FANG) and Occidental Petroleum (OXY) both declining over 3%, indicating growing concerns in the energy sector.
- Cryptocurrency Market Retreats: Bitcoin plummeted over 7% to a 9.75-month low, leading to widespread declines in cryptocurrency-related stocks, with Galaxy Digital Holdings (GLXY) and Strategy (MSTR) both dropping over 6%, reflecting weakened investor confidence in the crypto market.
See More
Goldman Sachs and Broadcom Investment Outlook Positive
- Goldman Sachs Advisory Role: Goldman Sachs has been appointed as the financial advisor for Coterra's $58 billion all-stock merger with Devon, marking the largest deal in the energy sector since Diamondback's $26 billion acquisition of Endeavor in 2024, thereby reinforcing Goldman's position in investment banking, which accounted for 15% of its overall revenue last year.
- M&A Activity Boost: CEO David Solomon stated that M&A transactions often trigger a flywheel of activity across the entire franchise, and the ongoing deal news further validates the initial bullish thesis on Goldman’s stock, which has risen 7.6% year-to-date, significantly outperforming the S&P 500's 1.5% increase.
- Broadcom Earnings Potential: Mizuho analysts recommend buying Broadcom on its recent pullback, citing an acceleration in earnings potential from multiple custom chip business opportunities in the coming year, despite Broadcom shares being down nearly 20% from their December peak, indicating strong growth prospects ahead.
- Price Target and Rating: Mizuho maintains a buy-equivalent rating on Broadcom with a price target of $480, implying a 44% upside from the current price of around $332, although the investment club prefers to wait for a further pullback before upgrading its rating to buy.
See More
