Coterra Energy on Thursday delivered mixed third-quarter results for sales and earnings. However, production volumes and cash generation — the latter being what the Street really cares about — came in ahead of expectations. Revenue in the three months ended September 30 was essentially flat versus the year ago period at $1.36 billion but did manage to outpace the $1.3 billion consensus forecast, according to analyst estimates compiled by LSEG. Adjusted diluted earnings per share fell 36% versus the year-ago period to 32 cents and missed expectations of 34 cents, LSEG data showed. The results were released after Thursday’s close. The post-earnings conference call was held Friday morning. Coterra Energy Why we own it: Formed by the merger of Cabot Oil & Gas and Cimarex, Coterra Energy is an exploration-and-production company with a high-quality, diversified asset portfolio. The company practices capital discipline and is a low-cost operator. It’s committed to returning 50% or greater of annual free cash flow to shareholders. Our lone energy stock, Coterra also acts as a hedge on inflation and geopolitical risk. Competitors: EQT Corp ., Devon Energy , Marathon Oil Last buy: Oct. 1, 2024 Initiation: April 14, 2022 Bottom line Though sales and discretionary cash flow results came up short, management’s strict adherence to cost discipline allowed for beats where it counts: on earnings and free cash flow generation. However, shares are moving lower Friday after management cut its discretionary cash flow outlook for the remainder of the year. To a large extent, this is out of management’s control and at the mercy of energy prices. The team is demonstrating strong execution on factors within its control by simultaneously reducing its capital expenditures outlook for the full year while raising the production outlook for the remainder of this year. Coterra returned a total of $265 million to shareholders in the third quarter — split between $154 million in declared dividends and $111 million coming from share repurchases — amounting to about 96% of free cash flow generated in the quarter. So far this year, Coterra has returned 100% of its free cash flow to shareholders. At the end of September, the company had $1.2 billion remaining under its previous $2 billion authorization. As a reminder, management’s stated commitment is to return 50% or more of annual free cash flow via dividends and buybacks. We’re not looking to add to our own position now, but do believe the company is operating effectively on the factors in its control, reallocating resources between natural gas production and oil production based on their price swings. Daniel Guffey, vice president of finance, planning & analysis said on the call: “2025 promises to deliver a more constructive natural gas market. The combination of growing LNG exports, increased electrical generation demand and the prospect of winter weather suggests a tighter supply demand picture for natural gas in…
Read More: Coterra Energy posts a mixed quarter, delivers on what matters most