Early this month, natural gas producer Ultra Petroleum Corp. (UPL) announced its financial results for first quarter 2011.
Below we have highlighted the analysts’ sentiment regarding the company’s outlook post earnings results.
Earnings Recap
Ultra Petroleum reported marginally weaker-than-expected first quarter 2011 results, hurt by lower prices.
Earnings per share, excluding special items, were 57 cents, a penny short of the Zacks Consensus Estimate. However, compared with the year-earlier period, Ultra Petroleum’s adjusted earnings per share rose 3.6% attributed to higher production. Total operating revenue, at $257.3 million, fell shy of the Zacks Consensus Estimate of $315.0 million and was also below the year-ago level of $273.1 million.
(Read our full coverage on this earnings report: Ultra Petro Net Up, Misses View)
Agreement of Estimate Revisions
However, the analysts exhibit a strong bullish sentiment toward Ultra Petroleum’s next few quarters based on its industry-leading production and reserve-growth prospects. The company also displays a very competitive cost structure, which extends consistency to its growth and returns throughout the business cycle.
Out of 21 analysts covering the stock, 7 have moved their estimates up for second quarter 2011 over the last 7 days, against a downward revision by just 2 analysts.
A similar trend is noticed for fiscal years 2011 and 2012. For the current year, of the 24 analysts covering the stock, 7 have increased their forecasts, while 4 have gone in the opposite direction in the last 7 days.
Estimates were up for 2012 in the last one week, with 6 upward revisions and 5 negative movements made among a total of 19 analysts.
Magnitude of Estimate Revisions
Taking into account the adjustments over the last week, the Zacks Consensus Estimate for the second quarter upped by a penny to 67 cents, while that for fiscal 2011 nudged up to $2.68 from $2.66. Indicating a similar positive trend, 2012 estimates improved to $2.96 from $2.92.
Our Recommendation
We expect Ultra Petroleum to reap significant benefits from its substantial acreage position in the attractive Green River Basin of Wyoming, the Jonah natural gas field and the Pinedale Anticline area.
During the last 5 years, the company has increased its production at a compounded annual growth rate of approximately 24%. Ultra Petroleum reaffirmed its full-year 2011 production in the range of approximately 245–255 Bcfe, reflecting an increase of up to 19% from 2010. For the second quarter, the company targets to produce 59.5–61.5 Bcfe.
However, we maintain our long-term Neutral recommendation on the stock, considering the company’s sensitivity to gas price fluctuations, volatility in the macro backdrop and operational disturbances.
Ultra Petroleum, which faces competition from peers such as Cabot Oil & Gas Corporation (COG) and EOG Resources (EOG), currently retains a Zacks #3 Rank (short-term Hold rating).
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