Concho Resources Inc. (NYSE:CXO): Earnings Expected To Remain Subdued

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Looking at Concho Resources Inc.’s (NYSE:CXO) earnings update in September 2018, analyst consensus outlook appear bearish, as a -1.0% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 14%. Currently with a trailing-twelve-month profit of US$949m, the consensus growth rate suggests that earnings will drop to US$939m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Concho Resources in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Concho Resources

Can we expect Concho Resources to keep growing?

Longer term expectations from the 20 analysts covering CXO’s stock is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of CXO’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

NYSE:CXO Future Profit February 14th 19
NYSE:CXO Future Profit February 14th 19

This results in an annual growth rate of 26% based on the most recent earnings level of US$949m to the final forecast of US$2.3b by 2022. This leads to an EPS of $10.46 in the final year of projections relative to the current EPS of $6.44. Margins are currently sitting at 37%, which is expected to expand to 45% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Concho Resources, there are three important aspects you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Concho Resources worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Concho Resources is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Concho Resources? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.