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A Post-Earnings Analysis of Hess Corporation's 4Q16

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Part 4
A Post-Earnings Analysis of Hess Corporation's 4Q16 PART 4 OF 6

Why Has Hess’s Stock Been on a Downtrend?

Hess’s stock performance

Following Hess Corporation’s (HES) 4Q16 earnings release on January 25, 2017, the company’s stock fell 1.8%. However, it has risen ~64% YoY (year-over-year).

In this part of the series, we’ll analyze Hess’s stock performance with respect to movements in the broader industry and the broader market.

Why Has Hess’s Stock Been on a Downtrend?

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HES’s stock has been experiencing weakness since January 12, 2017, likely on the back of its January 12 announcement that its 4Q16 results would include a noncash charge of ~$3.8 billion and its 2017 capital expenditure (capex) would be greater than its 2016 capex.

From January 11 to January 25, Hess’s stock underperformed the Energy Select Sector SPDR ETF (XLE), giving lower returns at the end of the period. HES’s stock fell ~9% at the end of the two-week period, whereas XLE rose 0.05%.

Both XLE and HES underperformed the SPDR S&P 500 ETF (SPY), the broader market ETF, as we can see in the graph above. Hess’s better-than-expected 4Q16 earnings failed to give its stock a boost. However, it rose $0.11 in after-hours trading.

Analysts’ recommendations

Approximately 48% of analysts rate Hess as a “buy.” The stock’s average price of $65.58 implies a potential return of ~16% in the next 12 months. Analysts’ high and low target prices for the stock stand at $80.00 and $54.00, respectively.

On December 8, 2016, JPMorgan Chase upgraded its rating for HES from “neutral” to “overweight.”

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