Sweet 16 Update - Feb 25
Posted: Sat Feb 25, 2017 5:11 pm
I still have several individual company forecast/valuation models to update before I can finish updating the Sweet 16 summary spreadsheet, but I wanted to make a few general comments. Some of this will be repeated in my weekly podcast.
Most of the Sweet 16 are now down YTD; even the companies that have reported outstanding Q4 results and strong YOY proven reserve growth. Even PXD which had one of the best years I have ever seen for an upstream company has pulled back since reporting Q4 results.
The Sweet 16 declined 4.89% last week and is now down 8.35% YTD, compared to the S&P 500 Index that is up 5.74% YTD.
Wall Street may just be rotating some money out of energy because the sector had such a good 2nd half of 2016 (the Sweet 16 was up 47% in 2016), but I think investors in general are very confused about where oil prices are heading. Lots of confusion about supply & demand is created by the "talking head's" commentary. Then add the super mild February weather causing a pull back in gas prices and the "bears" winning the argument - for now.
Something that I watch very carefully (and so should you) is the direction of each companies' price target in the 2-3 weeks after they release quarterly results. First Call's price targets are just the average of all the analysts' price forecasts submitted to Reuters. It takes analysts several days or even weeks to get all of their forecast models updated and "blessed" by management. So, if a company's price target goes up it is a good indication that the Wall Street Gang likes what they heard from the company causing them to increasing their revenue, earnings per share and cash flow per share forecasts.
Last week First Call
> increased their price targets on CXO, CLR, DVN, FANG, NBL, PDCE and PXD
> no change to price targets for AR, EOG, PE and RSPP (only PE has released Q4 results)
> decreased their price targets (very slightly) for GPOR, NFX, RRC and SM
All of First Call's price targets for the Sweet 16 are way above the current share prices. The Sweet 16 spreadsheet that I generate each weekend shows my valuation per share compared to First Call's current price target for each company. You should be looking at it each weekend.
I have decided to make several changes to the Sweet 16, but they will not be announced until late March. I have lots of work to do.
Most of the Sweet 16 are now down YTD; even the companies that have reported outstanding Q4 results and strong YOY proven reserve growth. Even PXD which had one of the best years I have ever seen for an upstream company has pulled back since reporting Q4 results.
The Sweet 16 declined 4.89% last week and is now down 8.35% YTD, compared to the S&P 500 Index that is up 5.74% YTD.
Wall Street may just be rotating some money out of energy because the sector had such a good 2nd half of 2016 (the Sweet 16 was up 47% in 2016), but I think investors in general are very confused about where oil prices are heading. Lots of confusion about supply & demand is created by the "talking head's" commentary. Then add the super mild February weather causing a pull back in gas prices and the "bears" winning the argument - for now.
Something that I watch very carefully (and so should you) is the direction of each companies' price target in the 2-3 weeks after they release quarterly results. First Call's price targets are just the average of all the analysts' price forecasts submitted to Reuters. It takes analysts several days or even weeks to get all of their forecast models updated and "blessed" by management. So, if a company's price target goes up it is a good indication that the Wall Street Gang likes what they heard from the company causing them to increasing their revenue, earnings per share and cash flow per share forecasts.
Last week First Call
> increased their price targets on CXO, CLR, DVN, FANG, NBL, PDCE and PXD
> no change to price targets for AR, EOG, PE and RSPP (only PE has released Q4 results)
> decreased their price targets (very slightly) for GPOR, NFX, RRC and SM
All of First Call's price targets for the Sweet 16 are way above the current share prices. The Sweet 16 spreadsheet that I generate each weekend shows my valuation per share compared to First Call's current price target for each company. You should be looking at it each weekend.
I have decided to make several changes to the Sweet 16, but they will not be announced until late March. I have lots of work to do.