On Apr 11, Zacks Investment Research downgraded EOG Resources, Inc. EOG to a Zacks Rank #4 (Sell).
Why the Downgrade?
EOG Resources is an exploration and production firm with a large oil exposure – about 46% of its net proved reserves. This makes it highly susceptible to the weakness in commodity price that has nearly halved since June, last year.
The company had reported weak numbers on the earnings front missing the Zacks Consensus Estimate. The results were also substantially below that reported in the year-ago quarter. Low realizations are accountable for the disappointing results. With prices anticipated to remain weak throughout 2015, more troubles lay ahead for the firm.
Also, a 40% reduction in capital spending from that in the last year and delay in well completions in order to improve profitability is likely to negatively impact production volumes, thereby aggravating the woes.
Although EOG has made some progress in expanding internationally, it is still largely a North American producer. The lack of international diversification further increases the risks associated with the stock when compared with some of its more diversified peers.
Additionally, a majority of brokerage firms have lowered earnings estimates for EOG Resources over the past two months, indicating further bearishness ahead. Full-year earnings estimates have fallen to 20 cents per share from 95 cents 60 days ago.
Other Stock Picks
Better-ranked players from the oil and gas exploration and production industry include Range Resources Corporation RRC, Stone Energy Corp. SGY and Whiting Petroleum Corp. WLL. All these stocks sport a Zacks Rank #1 (Strong Buy).
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