SM Energy (SM) Up 4.5% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for SM Energy (SM). Shares have added about 4.5% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is SM Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.

SM Energy Beats on Q3 Earnings, Announces Merger With Civitas

SM Energy reported third-quarter 2025 adjusted earnings of $1.33 per share, which surpassed the Zacks Consensus Estimate of $1.25. The bottom line, however, declined from the year-ago quarter’s figure of $1.62.

Total quarterly revenues of $811.6 million missed the Zacks Consensus Estimate of $838 million. However, the top line increased from the year-ago quarter’s level of $643.6 million.

Better-than-expected quarterly earnings were primarily driven by increased oil equivalent production volumes. However, a significant decline in the average realized oil prices and an increase in production expenses partially offset the gains.

Operational Performance

Production

SM Energy’s third-quarter production volume amounted to 213.8 thousand barrels of oil equivalent per day (MBoe/d) (almost 53% oil), reflecting an increase of 26% from the year-ago level of 170 MBoe/d. The Zacks Consensus Estimate for the same was pinned at 213 MBoe/d. The growth was primarily aided by an increase in oil-weighted production from the company’s Uinta Basin assets.

Oil production increased approximately 47% year over year to 113.9 thousand barrels per day (MBbls/d). The Zacks Consensus Estimate for the same was pegged at 115 MBbls/d.

The company produced 418.2 million cubic feet per day of natural gas in the quarter, up 11% year over year. Natural gas liquids production totaled 30.2 MBbls/d in the third quarter. The figure remained flat year-over-year.

Realized Prices

Before the effects of derivative settlements, the average realized price per Boe was $41.23 compared with $41.08 in the year-ago quarter. The average realized oil price slipped 15% to $63.83 per barrel.

The average realized price of natural gas improved 50% year over year to $2.19 per thousand cubic feet, while that for natural gas liquids declined 4% to $20.79 per barrel.

Costs & Expenses

On the cost front, unit lease operating expenses increased 20% year over year to $5.67 per Boe. General and administrative expenses decreased 11% to $2 per Boe from the prior-year level of $2.25. Transportation expenses jumped 77% to $3.77 per Boe.

Total hydrocarbon production expenses in the quarter were $229 million compared with the year-ago level of $148.4 million. Total exploration expenses were $11.5 million, lower than the year-ago quarter’s figure of $12.1 million.

Capex

Capital expenditures in the September-end quarter totaled $397.7 million, and adjusted free cash flow amounted to $234.3 million.

Balance Sheet

As of Sept. 30, 2025, SM Energy had cash and cash equivalents of $162.3 million and a net debt of $2.57 billion.

Guidance

For the fourth quarter of 2025, SM Energy expects production to be in the range of 206-212 MBoe/d. Of the total production, oil is expected to contribute 52-53%. Capital expenditures (net of the change in capital accruals), excluding acquisitions, are forecasted to be in the $225-$245 million range.

For full-year 2025, net production volume is expected to be in the range of 207-208 MBoe/d. Oil is anticipated to account for 53-54% of the total production. The company has narrowed its full-year net production guidance range, while maintaining the midpoint at the prior level of 200-215 Mboe/d. Full-year capital expenditures have been updated to be approximately $1.375-$1.395 billion. SM has also reduced exploration expenses to approximately $65 million.

Merger Announcement

Alongside the earnings release, SM Energy announced that it has entered an all-stock merger agreement with Civitas Resources, with the combined entity valued at approximately $12.8 billion. The combined valuation includes the net debt of both companies. Per the terms of the merger agreement, Civitas Resources shareholders will receive 1.45 shares of SM Energy common stock for each common share of Civitas.

The combination of the two companies is expected to establish a high-quality portfolio of assets across highly productive U.S. shale basins. Notably, the combined entity will own approximately 823,000 net acres across high-return shale basins, with a significant part of the acreage located within the Permian Basin. Furthermore, the company has identified annual synergies of approximately $200 million that are expected to generate additional shareholder value.

SM Energy has mentioned that the strategic combination of the two firms is expected to be immediately accretive to key financial metrics, including operating cash flow, debt-adjusted cash flow and free cash flow. SM stated that the asset portfolios of the two companies are complementary and the combination is expected to yield an increase in free cash flows that will enable the company to strengthen the balance sheet and generate higher shareholder returns.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -8.46% due to these changes.

VGM Scores

At this time, SM Energy has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a score of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, SM Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

SM Energy is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, EQT Corporation (EQT), a stock from the same industry, has gained 4.9%. The company reported its results for the quarter ended September 2025 more than a month ago.

EQT reported revenues of $1.75 billion in the last reported quarter, representing a year-over-year change of +26.7%. EPS of $0.52 for the same period compares with $0.12 a year ago.

For the current quarter, EQT is expected to post earnings of $0.74 per share, indicating a change of +7.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +5.9% over the last 30 days.

EQT has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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This article originally published on Zacks Investment Research (zacks.com).

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