Valued at a market cap of $22.4 billion, Devon Energy Corporation (DVN) is an independent energy company that engages in the exploration, development, and production of oil, natural gas, and natural gas liquids. The Oklahoma City, Oklahoma-based company’s operations are focused onshore in the United States.
Shares of this energy company have significantly lagged behind the broader market over the past 52 weeks. Devon Energy has declined 21.3% over this time frame, while the broader S&P 500 Index ($SPX) has gained nearly 22.7%. However, on a YTD basis, the stock is up 4.2%, compared to SPX’s 2.7% rise.
Narrowing the focus, DVN has lagged behind the Energy Select Sector SPDR Fund’s (XLE) 3.1% gain over the past 52 weeks but has outpaced XLE’s 2.3% rise on a YTD basis.
Headwinds, including declining oil prices and increasing competition, have primarily led to its underperformance over the past year.
Nonetheless, shares of DVN soared 1.7% following its Q3 earnings release on Nov. 5 as the company delivered better-than-expected Q3 adjusted earnings of $1.10 per share and revenues of $4 billion. However, its net profit declined 8.4% year-over-year to $1.30 per share, while its top line climbed 4.9% from the year-ago quarter. Strong production volumes from the Delaware Basin aided the results, but it was partially offset by the drop in realized prices of the commodities.
Fourth-quarter production is expected in the range of 811,000-830,000 Boe per day and capital spending is estimated in the band of $915-$985 million. The production guidance represents a 13% increase sequentially.
For the fiscal year, which ended in December, analysts expect DVN’s EPS to decline 18% year over year to $4.68. The company’s earnings surprise history is promising. It surpassed the Wall Street estimates in each of the last four quarters.
Among the 26 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on 16 “Strong Buy,” two “Moderate Buy,” and eight “Hold” ratings.
This configuration is slightly more bullish than three months ago, with 15 analysts suggesting a “Strong Buy” rating.
On Jan. 29, Piper Sandler analyst Mark Lear maintained an “Overweight” rating on Devon Energy and raised its price target to $54, which indicates a 58.3% potential upside from the current levels.
The mean price target of $48.88 represents a 43.3% upside from DVN’s current price levels, while the Street-high price target of $67 suggests an upside potential of 96.5%.
