Why Chesapeake Energy's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Just a matter of hours after investors cheered the move of Chesapeake Energy (NYSE: CHK  ) stripping Aubrey McClendon of his chairmanship, the mood changed. A disappointing earnings report pushed shares 13% lower today and analysts started piling on as well.

So what: Chesapeake's loss fell to $71 million, or $0.11 per share, in the first quarter. On an adjusted basis the company reported a profit per share of $0.10, but analysts had expected $0.34 per share in earnings. Cash flow estimates were also slashed nearly in half to $4.4 billion-$5.3 billion.

Now what: Analysts also downgraded the stock, adding to the sell-off today. On top of all that, there are reports that McClendon also ran a $200 million hedge fund that traded the same commodities the company produces. The bottom line here is that Chesapeake is a mess. As I pointed out yesterday, the company's stock looks fairly attractive but I would wait for this McClendon mess to play out before buying in. His problems seem to be getting worse by the day.

Interested in more info on Chesapeake Energy? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Motley Fool newsletter services have recommended buying shares of Chesapeake Energy. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1877300, ~/Articles/ArticleHandler.aspx, 11/26/2014 12:57:37 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement