Sweet 16 Update - January 17
Posted: Sat Jan 17, 2015 12:24 pm
The 2015 Sweet 16 Growth Portfolio spreadsheet has been updated and posted to the website:
> Tab 1 of the spreadsheet is a summary of the EPS and CFPS forecasts for each company
> Tab 2 shows my Fair Value Estimate compared to First Call's Price Target for each company as of 1-17-2015
Each weekend I check my forecast models against the First Call EPS forecasts. My earnings forecasts for Q4 are close to what FC is expecting. All sixteen companies are expected to report positive earnings for Q4. KEEP IN MIND that Q4 will include some very large mark-to-market adjustments that are not included in forecasts. Primarily, positive adjustments on the value of hedges and negative adjustments on fixed assets (Ceiling Test Adjustments and Impairment). So, "reported earnings" will be much different than "adjusted earnings".
It is best to ignore earnings and focus on cash flows from operations anyway.
On Tab One of the spreadsheet you can find my Cash Flow Per Share (CFPS) forecasts for each company for 2015. Companies of this quality should trade for 8X to 10X CFPS. The group is now trading for 4.83X my combined CFPS forecast for 2015. This explains why I believe there is close to 70% upside in this group.
First Call EPS forecasts are the average of all the analysts' forecasts submitted to Reuters. Forecasts for 2015 are all over the map because each analyst has a different opinion of what commodity prices will be this year. My 2015 EPS forecasts are all in the lower half of the range of those submitted to Reuters.
On the far right of the spreadsheet (Tab 1) you can find the date that I expect each company to release Q4 results. They start pouring in the 3rd week of February. Most of the companies will issue "Operations Updates" prior to when they release earnings. This is because they have to wait on the auditors to finish their work before they can release earnings. Some companies will release year-end reserve reports prior to earnings.
Diamondback Energy (FANG) is our early leader, up 9.8% YTD. I will probably increase my valuation after I see their Q4 results. FANG still expects YOY production growth of more than 40% in 2015 and more then half of their forecast oil production is hedged at $88.14/bbl. FANG also does a great job of maintaining a low cost structure. It has some of the lowest drilling & completion costs in the industry and it holds some very good acreage in the Permian Basin.
Rosetta Resources (ROSE) is at the top of my list of "Best Buys", trading at less than 2X my 2015 CFPS forecast.
You can find details on each company's hedges at the bottom of the individual company forecast models.
> Tab 1 of the spreadsheet is a summary of the EPS and CFPS forecasts for each company
> Tab 2 shows my Fair Value Estimate compared to First Call's Price Target for each company as of 1-17-2015
Each weekend I check my forecast models against the First Call EPS forecasts. My earnings forecasts for Q4 are close to what FC is expecting. All sixteen companies are expected to report positive earnings for Q4. KEEP IN MIND that Q4 will include some very large mark-to-market adjustments that are not included in forecasts. Primarily, positive adjustments on the value of hedges and negative adjustments on fixed assets (Ceiling Test Adjustments and Impairment). So, "reported earnings" will be much different than "adjusted earnings".
It is best to ignore earnings and focus on cash flows from operations anyway.
On Tab One of the spreadsheet you can find my Cash Flow Per Share (CFPS) forecasts for each company for 2015. Companies of this quality should trade for 8X to 10X CFPS. The group is now trading for 4.83X my combined CFPS forecast for 2015. This explains why I believe there is close to 70% upside in this group.
First Call EPS forecasts are the average of all the analysts' forecasts submitted to Reuters. Forecasts for 2015 are all over the map because each analyst has a different opinion of what commodity prices will be this year. My 2015 EPS forecasts are all in the lower half of the range of those submitted to Reuters.
On the far right of the spreadsheet (Tab 1) you can find the date that I expect each company to release Q4 results. They start pouring in the 3rd week of February. Most of the companies will issue "Operations Updates" prior to when they release earnings. This is because they have to wait on the auditors to finish their work before they can release earnings. Some companies will release year-end reserve reports prior to earnings.
Diamondback Energy (FANG) is our early leader, up 9.8% YTD. I will probably increase my valuation after I see their Q4 results. FANG still expects YOY production growth of more than 40% in 2015 and more then half of their forecast oil production is hedged at $88.14/bbl. FANG also does a great job of maintaining a low cost structure. It has some of the lowest drilling & completion costs in the industry and it holds some very good acreage in the Permian Basin.
Rosetta Resources (ROSE) is at the top of my list of "Best Buys", trading at less than 2X my 2015 CFPS forecast.
You can find details on each company's hedges at the bottom of the individual company forecast models.