Bull Of The Day: Matador Resources

Matador Resources Co. (MTDR) is an independent oil and natural gas producer. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by 33.3% next year.

Matador explores, develops, produces and acquires oil and natural gas resources in the United States. Its operations are focused on the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. Matador also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and the Cotton Valley plays in Northwest Louisiana.

It also has midstream operations and provides natural gas processing, oil transportation services, natural gas, oil and produced water gathering services and produced water disposal services to third parties.

 

Perfect 5-Year Earnings Surprise Track Record

On Oct 24, 2023, Matador Resources reported its third quarter earnings and beat on the Zacks Consensus Estimate by 17%. Earnings were $1.86 versus the Zacks Consensus of $1.59. That's a $0.27 beat.

Matador Resources has an amazing earnings surprise track record. It is an earnings all-star with 5 years of beats. That includes the years of the pandemic.

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Image Source: Zacks Investment Research

This is impressive, especially for a commodities company as commodities can be volatile.

It saw record results for the third quarter of 2023 and was the best quarter of total production in Matador's history. It averaged more than 135,000 barrels of oil and natural gas equivalent (BOE) per day. It was 3% higher than the prior record, in Q2, of 130,683 BOE per day.

There was record oil production during the third quarter of 77,529 barrels per day, up 2% than the previous record in the second quarter of 2023.

Natural gas production was also a record, up 6% sequentially, to 345.4 million cubic feet per day.

"We achieved these record production results despite the challenges of bringing on the largest batch of wells in Matador’s history as well as challenges associated with maintenance, weather and potential midstream takeaway constraints," said Joseph Wm. Foran, CEO.

 

Earnings Estimates Moving Higher for 2024

Earnings have been challenged for the energy companies in 2023 as 2022 saw high earnings on strong oil and natural gas prices due to the Ukraine War.

But analysts now expect higher earnings for Matador in 2024 after they are forecast to decline 33.1% this year to $7.04 from $10.53 last year.

But 2 estimates are higher in the last 30 days and 1 is lower in the last week for 2024. The 2024 Zacks Consensus Estimate is now $9.38 up from $8.56 over the last 60 days. That's earnings growth of 33.3%.

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Image Source: Zacks Investment Research

 

The Stock is Cheap

Shares of Matador Resources are down 13.4% over the last year and are up just 0.7% year-to-date. But with the earnings expected to rebound, it's a cheap stock.

Matador trades with a forward P/E of just 8.3.

In the third quarter adjusted free cash flow was $144.6 million. It paid down debt and did various brick-by-brick acquisitions. But it's also shareholder friendly. On Oct 24, 2023, Matador's board raised the fixed quarterly cash dividend to $0.20 per share, or $0.80 on an annual basis, up from $0.60 per share annually.

It's the fourth increase to the fixed dividend since the board initiated the dividend in the first quarter of 2021. The dividend currently yields 1.4%.

For investors looking for an energy producer where the earnings are on the rebound, Matador is one to keep on your short list.


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