Southwestern Energy (SWN) Stock: Exploding On Earnings

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Southwestern Energy Company (NYSE: SWN)

Southwestern Energy Company is having an incredible trading session today, and for good reason. The company reported its earnings for the most recent quarter, beating expectations. However, there was some bad news in the report when it comes to revenue. Nonetheless, today we’ll talk about what we saw from the report, how the stock reacted to the news, and what we can expect to see from SWN moving forward.

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SWN Reports Q2 Results

As mentioned above, Southwestern Energy is having a strong day in the market today after producing strong earnings. While earnings were indeed a hit, the company missed expectations with regard to revenue. Here’s what we saw from the report:

  • Earnings Per Share – When it comes to earnings per share, SWN definitely did not disappoint. During the second quarter, analysts were expecting that the company would report a loss of $0.10 per share. However, the company reported that during the second quarter, it produced a narrower loss of $0.09 per share.
  • Revenue – In terms of top-line revenue, SWN didn’t quite fare as well as it did with regard to earnings. During the second quarter, analysts were expecting that the company would generate revenue in the amount of $534.4 million. However, the company actually reported that, for the quarter, revenue came in at $522 million.
  • Guidance – While earnings were a hit and revenue was a miss, the tie breaker here was guidance. Southwestern Energy increased production guidance for the year 2016 by 45 Bcfe, or 5%, to 865-875 Bcfe, from earlier guidance of 815-835 Bcfe.

While revenue for the quarter was a miss, the earnings report was positive overall. This positive data was followed up by SWN CEO Bill Way with the statement below:

As promised, we took significant and deliberate steps this quarter to strengthen our balance sheet that, when combined with the continued outperformance by our assets, positions us to reinitiate drilling and completion activites and accelerate our path to value-adding growth…”

How The Market Reacted To The News

Although revenue for the quarter was a miss, investors are overwhelmingly excited about the report. With strong earnings and the company guiding toward increased production, investors are viewing the report as positive. As a result, we’re seeing strong gains in the value of SWN today. Currently (2:16), the stock is trading at $14.42 per share after a gain of $1.22 per share (9.24%) thus far today.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively mixed opinion of what we can expect to see from Southwestern Energy. In the short term, investor excitement could push this thing higher. However, the increased guidance on the earnings report points to big issues that the company is likely to face in the long run. It seems that investors are forgetting that the oil industry is struggling at the moment. With a supply glut in place, demand simply isn’t adding up to big dollars for the industry any more. However, more and more, we’re seeing companies like SGY working to increase production. If this production increase continues, we’re going to see big declines in oil. This will ultimately equate to declines in the value of the stock. So, there’s a double-edged sword here. Is there money to be made now? Sure. However, if you’re going to get in on this one, make sure you’re cautious and watch the oil price very closely.

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What Do You Think?

Where do you think SGY is headed moving forward? Join the discussion at TalkTRENDZ!

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