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Can EOG Resources’ Stock Price Continue Rallying Post-1Q16?

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May. 10 2016, Updated 4:08 p.m. ET

EOG Resources’ stock price action

EOG Resources (EOG) announced its 1Q16 earnings on May 5, 2016, after the market closed. Better-than-expected earnings led to EOG Resources’ stock price falling by 3.2% the next day.

In the three months leading up to the earnings release, EOG Resources’ stock price rose by ~31%, mainly due to the ~57% bounce in crude oil (USO) (SCO) (DWTI) prices during the same period.

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EOG Resources’ stock price trend changes

Falling crude oil (UCO) and natural gas (UGAZ) prices over the last two years have led to a falling trend in the entire upstream sector. EOG is no exception. However, since January 2016, EOG Resources’ stock has been following a new uptrend. It’s clearly developing a pattern of higher highs and higher lows.

EOG Resources’ relative performance

In 2016, EOG has been underperforming. Whereas it has risen by ~12%, oil and gas producers Denbury Resources (DNR), Continental Resources (CLR), and WPX Energy (WPX) have risen by ~80%, ~69%, and ~50%, respectively. The Energy Select Sector SPDR ETF (XLE) generally invests at least 95% of its total assets in oil- and gas-related equities from the S&P 500 (SPY).

EOG Resources’ stock price movement after past earnings beats

In the last year, there have been four occasions when EOG beat the earnings expectations: 4Q15, 3Q15, 2Q15, and 1Q15.

EOG reported its 4Q15 earnings after the market closed on February 25, 2016. In 4Q15, excluding one-time items, EOG reported a loss of $0.27 per share, $0.05 better than consensus for a loss of $0.32 per share. Following the earnings release, despite better-than-expected earnings, EOG Resources’ stock price fell by ~5% in three sessions.

For its 3Q15 earnings, excluding the one-time items, EOG reported a profit of $0.02 per share, $0.32 better than the consensus for a loss of $0.30 per share. Following the earnings release, despite the earnings beat, EOG Resources’ stock price fell by ~6% in five sessions.

A similar reaction was observed after the 2Q15 and 1Q15 earnings releases, with EOG Resources’ stock price falling by ~4% in one session and ~11% in 12 sessions, respectively. In 2Q15 and 1Q15, EOG beat the consensus earnings estimates by $0.18 per share and $0.03 per share, respectively.

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