Chesapeake Energy (CHK) Stock Falls Despite Earnings Beat, Oil Prices Ongoing Rally

NEW YORK (TheStreet) -- Shares of Chesapeake Energy  (CHK) fell 2.9% to $15.40 in morning trading Wednesday despite a first-quarter earnings beat and the continued increase in oil prices.

Excluding one-time items that reduced Chesapeake's net income by $3.8 billion, the company earned a profit of 11 cents a share. Analysts polled by Thomson Reuters had expected earnings of 4 cents a share.

The company had a first-quarter net loss of $3.78 billion, or $5.72 per share, compared to a profit of $374 million, or 54 cents per share, in the same period one year earlier.

Chesapeake increased its expectations for oil and gas output to a range of 640,000 to 650,000 barrels oil equivalent per day (boepd) from a range of 635,000 to 645,000 boepd.

Oil prices also continued their rally on Wednesday. WTI crude was up 2.62% to $61.98 at 10:32 a.m., while Brent crude was up 2.41% to $69.15, according to CNBC.

Separately, TheStreet Ratings team rates CHESAPEAKE ENERGY CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHESAPEAKE ENERGY CORP (CHK) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues rose by 11.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.09, which illustrates the ability to avoid short-term cash problems.
  • CHESAPEAKE ENERGY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CHESAPEAKE ENERGY CORP increased its bottom line by earning $1.83 versus $0.68 in the prior year. For the next year, the market is expecting a contraction of 110.1% in earnings (-$0.19 versus $1.83).
  • CHK's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 42.01%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • Net operating cash flow has decreased to $829.00 million or 21.27% when compared to the same quarter last year. Despite a decrease in cash flow CHESAPEAKE ENERGY CORP is still fairing well by exceeding its industry average cash flow growth rate of -42.26%.
  • You can view the full analysis from the report here: CHK Ratings Report

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