Strength Seen in SM Energy (SM): Can Its 5.3% Jump Turn into More Strength?

SM Energy (SM) shares soared 5.3% in the last trading session to close at $20.04. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 4% gain over the past four weeks.

The surge can be attributed to SM Energy’s oil-focused operations in the prolific basins of the United States, including the Permian Basin, Uinta Basin and Eagle Ford regions. Its recent merger with Civitas Resources reinforces its position as a leading, independent oil-focused producer in the United States. The combined company boasts a premier asset portfolio consisting of roughly 823,000 acres, of which the most valuable is its Permian Basin position. As the West Texas Intermediate (WTI) hovers above $60 per barrel, the company is expected to sustain profitability in the future, given its operations in low-cost basins. Additionally, the global demand for oil and gas is expected to rise, with the increasing demand for power and energy, supporting SM Energy’s long-term performance. The company’s expansion in the U.S. shale basins, with low production costs are expected to support a bright production outlook for SM.

This independent oil and gas company is expected to post quarterly earnings of $0.73 per share in its upcoming report, which represents a year-over-year change of -61.8%. Revenues are expected to be $766.12 million, down 10.1% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For SM Energy, the consensus EPS estimate for the quarter has been revised 11.1% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on SM going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

SM Energy is a member of the Zacks Oil and Gas - Exploration and Production - United States industry. One other stock in the same industry, Antero Resources (AR), finished the last trading session 0.7% higher at $34.22. AR has returned 5.2% over the past month.

For Antero Resources, the consensus EPS estimate for the upcoming report has changed -24% over the past month to $0.53. This represents a change of -8.6% from what the company reported a year ago. Antero Resources currently has a Zacks Rank of #3 (Hold).

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

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