Shares of Apache Corporation (APA) slid yesterday despite the company's better than expected earnings for the fourth quarter, which Credit Suisse attributed to the fact that the company's 2018 and longer-term guidance disappointed due to its lower than expected Permian outlook.

WHAT'S NEW: Yesterday, Apache reported Q4 earnings per share, adjusted for certain items that impact the comparability of results including the impact of U.S. tax reform, of 33c on total revenue of $1.586B. Analysts were expecting the company to report EPS of 24c on revenue of $1.54B, according to FactSet. The company said it delivered reported production of 440,000 barrels of oil equivalent per day and adjusted production of 362,000 BOE per day in the quarter. In addition, Apache achieved U.S. production of 222,000 BOE per day in Q4, coming in at the high end of its guidance.

OUTLOOK: Looking ahead, Apache established a 2018 capital budget of $3B, with over 70% allocated to the Permian, including $500M for Alpine High midstream. Internationally, the company said it plans to continue investing at a level to sustain long-term free cash flow in Egypt and the North Sea. In addition, Apache expects to invest roughly $7.5B from 2018 to 2020 in the upstream worldwide and $1B in midstream at Alpine High.

STREET RESEARCH: Following the quarterly report, Bernstein analyst Bob Brackett reaffirmed an Outperform rating though he lowered his price target to $45 from $54 on Apache shares. The analyst said that while the company laid out a 3-year strategy that "significantly" grows the Alpine High, in net the topline number is high single digits. Brackett noted that investors "overly punish" production misses. For now, the analyst suspects that either production beats or "new" news on the Alpine High will be needed to re-rate the stock's historical multiple. In addition, Credit Suisse analyst William Featherston maintained a Neutral rating on Apache but cut his price target on the shares to $39 from $43, saying that its 2018 and long-term guidance disappointment was due to its "underwhelming" Permian outlook. He said the company's three-year outlook implied 2019-20 capex that was about 20% below expectations, though its corresponding production targets were about 3-6% below consensus and imply a "dramatic decline" in Apache's overall oil mix. The analyst added that an Alpine High update is unlikely to reverse sentiment on the stock.

PRICE ACTION: After having fallen about 6.4% yesterday, Apache has regained about 1% in late morning trading today to trade at $35.32 per share.