Please ensure Javascript is enabled for purposes of website accessibility

Why SM Energy Stock Tanked 12% Today

By Reuben Gregg Brewer - Updated Feb 18, 2021 at 1:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors weren't pleased with the company's earnings. Here's a quick review of what it reported for the quarter.

What happened

Shares of U.S. exploration and production company SM Energy (SM 0.03%) fell as much as 12% in morning trading on Thursday. Although some of that was likely related to lower natural gas prices, at least a portion of the downbeat mood was driven by the energy company's earnings, which were released after the market closed on Wednesday.  

So what

SM Energy's top line came in at $320 million in the fourth quarter of 2020, down from $452 million in the same quarter of 2019. Despite that decline, cost reductions helped it turn in adjusted earnings of $0.02 per share, up from a loss of $0.04 per share in the prior year. But Wall Street had been projecting a profit of $0.07 per share, which means there was a pretty sizable miss. Revenue was a little light of expectations as well. Investors, not surprisingly, were displeased.  

An oil Well and two men writing in notebooks in the foreground.

Image source: Getty Images.

SM Energy is expecting to see increased production in 2021 over 2020. And if energy prices remain at recent levels, that would likely mean a better year.

But the driller didn't provide much guidance in its earnings release about the hit it will take from the cold front now shutting down vast swaths of Texas, a state in which SM Energy has material operations. It is, basically, assessing the impact, which suggests that first-quarter earnings may not be great reading. And, extrapolating just a little, it indicates that the full-year projections it is currently making may already be facing notable headwinds. Investors showing a little caution here seems pretty logical.  

Now what

The energy sector is historically a highly volatile area of the market. The stock of relatively small SM Energy (with a roughly $1.4 billion market cap) has been particularly volatile since the pandemic sent energy demand into a tailspin. Although energy prices have been solidifying of late, as have the shares of SM Energy, the driller now has to deal with the disruption caused by adverse weather.

Most investors looking at the energy patch would probably be better off sticking to larger, more diversified companies like Chevron, a name that Warren Buffett recently revealed to be in Berkshire Hathaway's portfolio.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SM Energy Company Stock Quote
SM Energy Company
SM
$37.56 (0.03%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/22/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.