Can Diamondback (FANG) Run Higher on Rising Earnings Estimates?

Diamondback Energy (FANG) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

Analysts' growing optimism on the earnings prospects of this energy exploration and production company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Diamondback Energy, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $3.06 per share, which is a change of -32.6% from the year-ago reported number.

The Zacks Consensus Estimate for Diamondback has increased 40.75% over the last 30 days, as four estimates have gone higher while two have gone lower.

Current-Year Estimate Revisions

The company is expected to earn $14.88 per share for the full year, which represents a change of +11.3% from the prior-year number.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, six estimates have moved up for Diamondback versus one negative revision. This has pushed the consensus estimate 59.54% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, Diamondback currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Diamondback shares have added 11% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.

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Diamondback Energy, Inc. (FANG): Free Stock Analysis Report

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

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