SM Energy (SM) Soars 8.3%: Is Further Upside Left in the Stock?

SM Energy (SM) shares soared 8.3% in the last trading session to close at $30.04. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 18.2% 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 crude oil price has increased to nearly $90 per barrel, due to the U.S.-Iran conflict in the Middle East, the company is expected to generate handsome profits in the upcoming quarters, given its operations in low-cost basins. The company’s expansion in the U.S. shale basins, with low production costs, is expected to support a bright outlook for SM.

This independent oil and gas company is expected to post quarterly earnings of $1.04 per share in its upcoming report, which represents a year-over-year change of -40.9%. Revenues are expected to be $1.47 billion, up 73.6% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For SM Energy, the consensus EPS estimate for the quarter has been revised 1.7% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate 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, Vitesse Energy (VTS), finished the last trading session 2% higher at $19.89. VTS has returned -13.5% over the past month.

Vitesse's consensus EPS estimate for the upcoming report has changed -50% over the past month to $0.05. Compared to the company's year-ago EPS, this represents a change of -78.3%. Vitesse currently boasts a Zacks Rank of #4 (Sell).

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SM Energy Company (SM): Free Stock Analysis Report

Vitesse Energy, Inc. (VTS): Free Stock Analysis Report

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

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