After a slight decline year-to-date, at the current price of around $123 per share, we believe EOG Resources (NYSE: EOG), an energy company engaging in the exploration, development, production, and marketing of crude oil and natural gas, looks fairly priced at this point. In recent months, EOG’s stock price has been affected more by the macroeconomic outlook than its profitability, with economic indicators pointing to a slowdown. Despite high profits and a modest valuation, EOG’s stock may continue to tread water in the short term. Oil prices have been surprisingly lower than expected at the beginning of the year. However, oil prices have jumped over the last week – boosted by a falling U.S. dollar and supply cuts by the world’s biggest oil exporters (Saudi Arabia and Russia). Brent futures currently trade at $80.55 a barrel and U.S. West Texas Intermediate crude settled at $76.56 (as of July 20). A report released by OPEC also kept an optimistic outlook for world oil demand despite weak economic growth. It raised its growth forecast for 2023 and predicted only a slight slowdown in 2024, with China and India expected to keep driving the expansion in fuel use.
In Q1, EOG’s revenues jumped 52% year-over-year (y-o-y) to $6 billion. In addition, its net income surged more than five-fold to $2 billion, or $3.45 per share, from $390 million, or $0.67 per share, in the year-earlier quarter. The company’s cash flow from operations also nearly quadrupled y-o-y to $3.25 billion. During the first quarter, its average crude oil price fell ~20% to $77.26 per barrel and its average natural gas liquids price plunged 35% to $25.67 per barrel, but total volumes rose 7% to 943K barrels of oil equivalent per day (boe/day) from 883K boe/day a year ago.
We forecast EOG’s Revenues to be $19.1 billion for the fiscal year 2023, down 16% y-o-y. Looking at the bottom line, we now forecast EPS to come in at $11.86. Given the changes to our revenues and earnings forecast, we have revised our EOG’s Valuation to $123 per share, based on $11.86 expected EPS and a 10.4x P/E multiple for the fiscal year 2023 – in line with the current market price.
It is helpful to see how its peers stack up. EOG Resources Peers shows how EOG stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
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