The stock of independent exploration and production company PDC Energy, Inc. (PDCE), which develops and explores for crude oil, natural gas and natural gas liquids (NGLs), has gained 297.9% over the past year. It hit its 52-week high of $42.79 on March 11, 2021, driven by impressive fourth quarter results.
The company is expected to continue benefiting in the near-term because oil prices are on the rise. Furthermore, its three-pronged approach to sustainable value creation—a commitment to significantly reduce absolute debt levels, a stock repurchase program, and planned quarterly dividends—is expected to appeal to shareholders.
So, here are the factors that we think could influence PDCE’s performance in the coming months:
Increasing Crude Oil Prices
Oil prices have been on the rise in recent months on the back of an improving global economy. Also, since OPEC and its oil-producing allies are expected to continue cutting production—even if at a lower-than-previous rate—demand could outweigh the supply. Thus, oil prices should continue to increase in the near term. According to the United States’ Energy Information Administration (EIA), Brent crude oil prices are expected to average $64 per barrel in the second quarter of 2021. So, PDCE is expected to benefit greatly from increasing demand for crude oil and rising prices.
Robust Financials
The company’s total revenues increased more than 5% year-over-year to $278.56 million for the fourth quarter, ended December 31, 2020. Its revenues from crude oil, natural gas and NGLs sales were $343.40 million for the quarter compared to $339.81 million in the prior-year period. PDCE’s adjusted net income increased 197.6% year-over-year to $110.70 million in the fourth quarter, and its adjusted EPS came in at $1.10, up 83.3% year-over-year. It also surpassed consensus EPS estimates in three of the trailing four quarters.
Favorable Analyst Estimates
Analysts expect PDCE’s revenue to increase 73.7% for the quarter ending June 30, 2021 and 29.1% in fiscal 2021. Its EPS is expected to increase 110.3% for the quarter ended March 31, 2021, 160.1% in fiscal 2021 and at a rate of 27.2% per annum over the next five years.
The stock has an average broker rating of 1.38. Of the 17 Wall Street analysts that have rated the stock, 16 rated it a Strong Buy or Buy. Also, PDCE is expected to hit $45.94 in the near term, which indicates a potential upside of 28%.
POWR Ratings Show Promise
PDCE has a B overall rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, PDCE has an A grade for Growth, consistent with analysts’ expectations that its revenue and EPS will increase significantly in coming quarters.
It has an A grade for Momentum also, which is in sync with its 182.7% gains over the past six months and 48.1% returns over the past three months.
PDCE is ranked #10 of 93 stocks in the Energy - Oil & Gas industry. We’ve rated it for Value, Stability, Sentiment, and Quality as well. Get all the PDCE ratings here.
Click here to access nine other top-rated stocks in the same industry.
Bottom Line
Even amid intense competition, PDCE has managed to retain its market dominance in the oil and natural gas exploration space by improving its financials consistently. Its acquisition of SRC Energy Inc. in January 2020 has helped it significantly improve its operations and further solidify its market position. Because oil prices are expected to rise further, we think it’s wise to bet on the stock now.
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PDCE shares were trading at $35.15 per share on Friday morning, down $0.74 (-2.06%). Year-to-date, PDCE has gained 71.21%, versus a 11.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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