EOG More Than A Growth Story

4/21/2014


  Recent Price
$101
  Dividend
$0.50
  Yield
0.5%
  P/E Ratio
25
  Shares (millions)
548
  Long-Term Debt as % of Capital
28%
  52-Week Price Range
$103.29 - $56.03

Measured by growth alone, EOG Resources ($101; EOG) looks like a winner. The energy producer earns a Quadrix Momentum score of 98, reflecting such accomplishments as sales growth of 24%, per-share-profit growth of 45%, and operating-cash-flow growth of 40% last year.

While the 2013 numbers are not repeatable, rising oil production should sustain growth. Analysts project earnings growth of 18% this year and 12% next year, with estimates for both years rising over the last 30 days.

EOG grows more than profits; in February, the company broke a four-year string of dividend hikes below 10% with a 33% increase. Of course, growth alone does not an attractive investment make. Fortunately, EOG, initiated as a Long-Term Buy in the April 7 issue, has more to offer than stellar operating momentum.

Four sources of energy

Rich resources. In 2013, EOG replaced 264% of the reserves it used while boosting crude-oil production 40% to 220,000 barrels per day. The company targets a 27% gain in oil production this year, driving 11.5% production growth for the company as a whole. Last year, North America accounted for 84% of EOG's production, with most of the rest in Trinidad. In late March, EOG said five wells drilled earlier that month in the Eagle Ford shale region in South Texas were already producing a combined 13,000 barrels of oil per day, representing a 5.5% increase in companywide production. EOG, the largest holder of Eagle Ford acreage, generated returns of more than 100% on 466 net wells drilled in that field last year and plans to sink up to 520 this year.

Fundamentals: EOG earns a Quadrix Overall score of 98, with scores above 80 in five of the six categories and a 65 in Value. EOG is the only stock in the S&P 500 Index with five Quadrix category scores above 80 and the fifth at least 65, and one of just eight in our research universe of more than 4,800 stocks. While high Quadrix scores alone are not sufficient to drive a buy decision, EOG's scores imply a lack of weaknesses.

Valuation: Nobody would call EOG cheap, trading at 25 times trailing earnings. But relative to its growth, EOG's valuation stacks up nicely relative to the pricey exploration & production industry. The company trades at 21 times expected 2014 earnings, in line with the industry median. EOG's PEG ratio (forward P/E ratio divided by long-term profit-growth estimate) is 1.2, 14% below the industry median.

Cost advantages: EOG has boosted its gross profit margin in each of the last four years, demonstrating an ability to keep production costs under control. For instance, sand prices have trended higher for more than a decade, and concerns about dwindling supplies worry some energy producers. However, EOG invested in sand mines in 2010 and now controls the sand it needs for hydraulic fracturing, a procedure used to extract oil and natural gas from shale formations. EOG's low cost structure helped return on equity (ROE) rise to 15.6% in 2013, nearly twice the industry average, from 11.8% in 2012.

You can obtain an annual report for EOG Resources Inc. at 1111 Bagby, Houston, TX 77002, (713) 651-7000, www.eogresources.com.

EOG RESOURCES
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Dec '13
1.00
vs.
0.81
22%
94.15
-
78.00
24 - 20
Sep '13
1.16
vs.
0.87
22%
86.96
-
66.62
24 - 18
Jun '13
1.05
vs.
0.58
37%
69.50
-
56.03
22 - 18
Mar '13
0.90
vs.
0.59
17%
69.10
-
60.38
24 - 21
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2013
14.23
4.11
0.37
94.15
-
56.03
23 - 14
2012
11.45
2.84
0.34
62.25
-
41.24
22 - 15
2011
9.60
1.90
0.32
60.72
-
33.40
32 - 18
2010
5.85
0.59
0.31
57.47
-
42.71
97 - 72
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
98
98
65
85
96
95
81

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com