On Jan 2, Bonanza Creek Energy Inc. BCEI was raised to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Earnings estimate revisions are at the core of the Zacks investment philosophy. Stocks that have recently seen upward revision in estimates tend to outperform the market over the next nine to 12 months.
Over the last 60 days, the Zacks Consensus Estimate for 2017 earnings has been revised higher from 63 cents to $1.06. Also, for 2018, estimates were raised from 76 cents to $1.99.
Bonanza Creek has an impressive earnings surprise history. The upstream player managed to surpass the Zacks Consensus Estimate in three of the prior four quarters, the average positive surprise being 188.7%. Also, we expect the company to witness year-over-year earnings improvement of 100.6% in 2017 and 87.3% in 2018.
The business scenario looks profitable as West Texas Intermediate (WTI) oil recently traded at $62.21 per barrel — last touched before May 2015 — per Reuters. Also, natural gas is hovering around the psychological mark of $3 per million British Thermal Unit (BTU). Overall, the favorable commodity pricing scenario could fetch the exploration and production company attractive cashflow.
We also appreciate the company’s constant effort to reduce recurring cash operating expenses amid the volatile business scenario. Looking at the price chart, although Bonanza Creek failed to outperform the Zacks Oil US Exploration industry, we appreciate the company’s strong financials. Bonanza Creek has no current and long-term debt. The company’s liquidity as of Sep 30, 2017, was $223 million — comprising $31 million cash and borrowing capacity of $192 million.
Bonanza Creek Energy, Inc. Price and Consensus
Bonanza Creek Energy, Inc. Price and Consensus | Bonanza Creek Energy, Inc. Quote
Other Stocks to Consider
A few other prospective stocks in the energy sector are Lonestar Resources US Inc. LONE, Northern Oil and Gas Inc. NOG and Cabot Oil & Gas Corporation COG. Lonestar and Northern sport a Zacks Rank #1 (Strong Buy), while Cabot carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Fort Worth, TX, Lonestar is an upstream energy player. The company is expected to post year-over-year earnings growth of 81.3% in 2017.
Based in Minnetonka, MN, Northern Oil is an upstream energy player. The company’s 2017 revenues are estimated to grow almost 48%.
Headquartered in Houston, TX, Cabot is involved in exploration of oil and gas. The stock will likely report earnings growth of 350.8% in 2017.
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