Shares of Oklahoma City, Okla.-based crude oil and natural gas producer Continental Resources, Inc. (CLR) have been among the biggest gainers in the industry over the past year. CLR has gained 127.9% year-to-date, while the SPDR S&P Oil & Gas Exploration and Production ETF (XOP), which represents the broader oil and gas industry, has returned 63.9%. CLR has gained 133.3% over the past six months and 21.5% over the past month. The stock is currently trading slightly below its 52-week high of $37.31, which it hit on June 16.
The oil and gas industry’s stellar rebound has been one of the major drivers behind CLR’s impressive momentum. Recuperating industrial and manufacturing activities have driven a solid improvement in the company's sales. Supply related issues in the United States due to the Colonial Pipeline shutdown and Texas freeze earlier this year also contributed to the heightened demand. U.S. crude oil inventories fell by $5.10 million barrels in the last week of May.
CLR’s crude oil and natural gas sales increased 44.6% year-over-year to $1.25 billion in its fiscal first quarter, ended March 2021. The company’s impressive performance, driven by the industry tailwinds, helped the stock to gain 44.2% over the past three months.
Here’s what we think could shape CLR’s performance in the near term:
Stable Financials
CLR’s trailing-12-month revenues came in at $2.77 billion. Its gross profit stood at $2.24 billion, representing an 80.64% gross profit margin. Its trailing-12-month net operating cash flow and levered free cash flow were $1.80 billion and $576.87 million, respectively.
For its fiscal first quarter, ended March 31, CLR’s non-GAAP adjusted net income stood at $260.28 million, representing a substantial improvement from its negative year-ago value. The company’s EPS increased 106.3% from the same period last year to $0.72.
Impressive Growth Potential
A $1.06 billion consensus revenue estimate for fiscal second quarter ending June 2021 represents a 502.6% improvement year-over-year. The company’s EPS is expected to increase 160.6% from the prior-year quarter to $0.43 in the current quarter.
CLR’s revenues and EPS are expected to rise 75.5% and 299.1%, respectively, year-over-year to $4.54 billion and $2.33 in its fiscal year 2021.
POWR Ratings Reflect Bleak Prospects
CLR has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The company has a grade of A for Momentum, and B for Quality and Growth. CLR is currently trading above its 50-day and 200-day moving averages of $32.80 and $25.47, respectively, which is in sync with its Momentum grade. CLR’s levered free cash flow increased at a 39.4% CAGR over the past three years, consistent with its Growth grade. Also, CLR’s 80.64% gross profit margin is 109.9% higher than the 38.41%industry average, which justifies its Quality grade.
Of the 95 stocks in the Energy – Oil & Gas industry, CLR is ranked #20.
In addition to the grades we’ve highlighted above, one can check out CLR Ratings for Sentiment, Stability, and Value here.
Click here to view the top-rated stocks in the Energy – Oil & Gas industry.
Bottom Line
CLR is expected to grow further amid the bullish market trends. While OPEC+ is expected to ease supply cuts beginning next month, and the absence of a formal agreement with Iranian government so far could drive a further rise in oil prices in the near term. This should drive CLR’s revenues and earnings soon, making it an ideal investment bet now.
CLR shares were trading at $38.11 per share on Wednesday morning, up $0.97 (+2.61%). Year-to-date, CLR has gained 134.68%, versus a 14.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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