Devon Energy (DVN) is set to report third-quarter earnings on Wednesday, Nov. 5, after market close, with investors focused on the U.S. shale producer’s free cash flow and shareholder returns amid moderating crude prices.
Analysts expect earnings of $0.94 per share, down 14.5% year on year, on revenue of $4.12 billion, up 2.5% from a year earlier.
Devon’s management has identified certain key risks following its Q2, which include market volatility in energy resources, which remains the most critical threat to the financial stability of the business to date.
Second, the company faces factors that make it important to pay attention to potential problems in achieving cost savings forecasts and maintaining the desired level of energy production. After all, at the same time, the sector is experiencing a decline in drilling activity, one Seeking Alpha analyst said.
“I think it’s worth paying special attention to the risks that come not only from how sensitive DVN’s profits are to market volatility in oil and natural gas prices but also from the fact that the company has a negative Levered FCF Margin (TTM) ratio,” Dmytro Lebid notes.
He further added that the company has the potential to further increase its revenue and improve its efforts to reduce debt in its balance sheet structure. Alternatively, failure to manage the above risks will lead to a revision of the recommendation from “Buy” to “Hold” or “Sell.”
Over the last 2 years, DVN has beaten EPS estimates 75% of the time and has beaten revenue estimates 63% of the time.
Over the last 3 months, EPS estimates have seen 5 upward revisions and 12 downward. Revenue estimates have seen 1 upward revision and 4 downward.