On Aug 13, Zacks Investment Research upgraded Matador Resources Company (MTDR) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
This oil and gas company registered a significant earnings surprise of 166.67% in the second quarter, thanks to a 57% year-over-year improvement in the company’s oil production.
Total revenue in the reported quarter was $65.9 million, surpassing the year-ago figure of $55.9 million by 17.9% and the Zacks Consensus Estimate of $56 million by 17.1%. The strong performance was driven by a 61.2% rise in Oil and Natural Gas revenues.
Matador Resources continues to grow through acreage acquisitions. The company started the year with 15,900 gross and 7,600 net acres in Southeast New Mexico and West Texas. Year to date, the company has added 30,200 gross and 20,700 net acres in this liquid rich region. Matador Resources expects to carry out strategic acquisitions through 2013.
The company has raised its capital expenditure guidance for 2013 by 4.6% to $325 million. In addition, the company was able to raise its credit agreement by $70 million to $350 million. The additional borrowing capacity, increase in capital expenditure and cash flow from operations will help the company to fund its drilling operations and carry on strategic acquisitions.
The present valuation also makes Matador Resources attractive. The forward P/E multiple of the company is 22.9%, a discount of 20.5% to the peer group average of 28.8%. The price-to-book ratio is 2.45, lower than the industry average of 2.64. The ROE of the company is 7.4%, which is 64.4% higher than the peer group average of 4.5%.
The Zacks Consensus Estimate for 2013 has risen 14.3% in the last 7 days to 70 cents per share, reflecting year-over-year growth of 232.1%. For 2014, the Zacks Consensus Estimate increased 3.3% in the past one week to 92 cents, reflecting year-over-year growth of 32.19%.
Besides Matador Resources Company, other operators in the sector having a favorable Zacks Rank are Cabot Oil & Gas Corp. (COG), Range Resources Corp. (RRC) and VOC Energy Trust (VOC). All of these stocks presently carry a Zacks Rank #1 (Strong Buy).
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