Why SM Energy Co.'s Shares Plunged Today

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: Shares of SM Energy (NYSE: SM  ) fell as much as 19% after reporting and being downgraded by an analyst.

So what: Financial results from the fourth quarter showed a 46% increase in proved reserves to 428.7 million barrels of oil equivalent, or MMBOE, and adjusted fourth-quarter net income of $85.9 million, or $1.26 per share. The problem is that analysts were expecting $1.46 per share in earnings and that led KeyBlanc to lower its rating to hold and remove its price target.  

Now what: What's concerning analysts and investors is potentially higher costs in Eagle Ford resulting from longer lateral length drilling, which increases costs. That's a concern but consider that shares still trade at just 13 times forward estimates and the growth and cost cutting that SM Energy has in place has it on the right path. Rising energy prices will also help profits going forward, so I think there's more positive here than negative, and today presents a real buying opportunity.

3 more stocks benefiting from U.S. energy production
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


Read/Post Comments (0) | Recommend This Article (0)

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.

Be the first one to comment on this article.

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: 2846019, ~/Articles/ArticleHandler.aspx, 10/24/2014 5:46:20 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