Highlights of Q1 Earnings & Surprise History In the last reported quarter, the independent oil and gas explorer beat the consensus mark due to better-than- expected production volumes and commodity prices. APA reported adjusted earnings per share of $1.06, which beat the Zacks Consensus Estimate of 83 cents. Revenues of $2 billion also beat the Zacks Consensus Estimate by 37.3%. Key Takeaways APA Corporation (APA) is set to release second-quarter results on Aug. 6. The bottom-line estimate for the to- be-re ...

Company Overview - APA is expected to report quarterly earnings of $0.45 per share, reflecting a year-over-year decline of 61.5% [3] - Revenues are anticipated to be $2.07 billion, down 25.8% from the same quarter last year [3] - The Most Accurate Estimate for APA matches the Zacks Consensus Estimate, resulting in an Earnings ESP of 0% [12] Earnings Expectations - The earnings report is scheduled for release on August 6, and better-than-expected results could lead to a stock price increase [2] - Conversely, missing expectations may result in a decline in stock price [2] - The consensus EPS estimate has been revised 4% higher in the last 30 days, indicating a reassessment by analysts [4] Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1, 2, or 3 [10] - APA currently holds a Zacks Rank of 3, making it challenging to predict an earnings beat conclusively [12] Historical Performance - In the last reported quarter, APA exceeded the expected earnings of $0.83 per share, achieving $1.06, resulting in a surprise of +27.71% [13] - Over the past four quarters, APA has beaten consensus EPS estimates two times [14] Industry Context - Devon Energy, another player in the oil and gas exploration and production sector, is expected to report earnings of $0.82 per share, indicating a year-over-year decline of 41.8% [18] - Devon's revenues are projected to be $4.01 billion, up 2.5% from the previous year [18] - The consensus EPS estimate for Devon has been revised 13.8% higher in the last 30 days, but a lower Most Accurate Estimate results in an Earnings ESP of -0.16% [19]

Group 1 - APA's stock increased by 2.46% to $19.57, outperforming the S&P 500's gain of 0.02% on the same day [1] - Over the past month, APA's shares gained 2.91%, surpassing the Oils-Energy sector's gain of 2.64% but underperforming the S&P 500's 4.93% increase [1] Group 2 - APA is set to release its earnings report on August 6, 2025, with an expected EPS of $0.45, reflecting a 61.54% decrease from the same quarter last year [2] - The consensus estimate for revenue is $2.07 billion, down 25.8% from the prior-year quarter [2] Group 3 - For the full year, earnings are projected at $2.92 per share and revenue at $8.97 billion, indicating declines of 22.55% and 7.87% respectively from the previous year [3] - Recent revisions to analyst forecasts for APA may indicate changing business trends, with positive revisions suggesting optimism about the company's outlook [3] Group 4 - The Zacks Rank system, which incorporates estimate changes, has a strong track record, with 1 stocks averaging an annual return of +25% since 1988 [5] - Currently, APA holds a Zacks Rank of 3 (Hold), with the consensus EPS estimate having decreased by 3.2% over the past month [5] Group 5 - APA's Forward P/E ratio is 6.55, which is lower than the industry average of 11.06, indicating a valuation discount [6] - The company's PEG ratio stands at 6.24, compared to the industry average PEG ratio of 0.71 [7] Group 6 - The Oil and Gas - Exploration and Production - United States industry, which includes APA, has a Zacks Industry Rank of 173, placing it in the bottom 30% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Market Performance - The US stock market saw significant gains on July 23, with the Dow Jones Industrial Average rising by 507.85 points, or 1.14%, closing at 45010.29 points. The Nasdaq Composite increased by 127.33 points, or 0.61%, closing at 21020.02 points, marking its first close above the 21000-point threshold. The S&P 500 index rose by 49.29 points, or 0.78%, closing at 6358.91 points [1][3][4]. Trade Agreements - President Trump announced a trade agreement between the US and Japan, which has heightened market expectations for further trade agreements before the August 1 tariff deadline. The agreement includes a reduction of the reciprocal tariff rate from 25% to 15% and Japan's commitment to invest $550 billion in the US [2][6][7]. Sector Performance - In the S&P 500, nine out of eleven sectors experienced gains, with the healthcare and industrial sectors leading with increases of 2.03% and 1.75%, respectively. The utilities and consumer staples sectors saw declines of 0.79% and 0.07% [8]. - Major technology stocks mostly rose, with AMD increasing over 3%, and other companies like NVIDIA, Boeing, and TSMC rising over 2%. Financial stocks also saw gains, with Mizuho Financial up over 6% and UBS Group up over 3% [8]. Chinese Stocks - The Nasdaq Golden Dragon China Index rose by 0.75%, with notable increases in stocks such as iQIYI, which rose over 4%, and Tiger Brokers, which increased over 3%. However, some stocks like NIO and Li Auto saw declines of over 1% [9].

Industry Overview - The Zacks Oil and Gas - Exploration and Production - United States industry is facing challenges due to lower crude prices influenced by geopolitical factors and an oversupply of natural gas [1][3][5] - The industry is currently ranked 186 out of 245 Zacks industries, placing it in the bottom 24% [8][10] - The industry's earnings estimates for 2025 have decreased by 41.6% over the past year, indicating a negative outlook [10] Key Trends - Easing geopolitical tensions have led to a reduction in oil prices, with WTI crude trading around $65, impacting companies reliant on higher prices for new investments [3][4] - OPEC forecasts a significant increase in global oil demand to 123 million barrels per day by 2050, necessitating an investment of $18.2 trillion in the oil and gas sector [4] - Natural gas production in the U.S. has reached record levels, with storage exceeding seasonal norms by 6%, which may limit price increases [5] - The International Energy Agency (IEA) predicts a slowdown in global oil demand growth post-2026 due to the rise of electric vehicles and cleaner energy policies [6][7] Company Highlights - **W&T Offshore (WTI)**: A leading oil and natural gas explorer with a market capitalization of nearly $270 million, known for its disciplined operations and positive cash flow for 28 consecutive quarters [18][19] - **EQT Corporation (EQT)**: The largest natural gas producer in the U.S. with a market cap of approximately $35 billion, expected EPS growth rate of 46.3% over the next three to five years [21][22] - **APA Corporation (APA)**: Engaged in exploration and production with a market cap of around $7 billion, known for its successful drilling in Suriname and the Permian Basin [23][24] - **Civitas Resources (CIVI)**: Focused on the DJ Basin and Permian Basin, with a market cap of about $2.8 billion, recognized for strong well returns and shareholder returns [26][27] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 11.28X, significantly lower than the S&P 500's 17.71X, but above the sector's 4.86X [15]

Company Performance - APA closed at $19.47, reflecting a -3.18% change from the previous day, underperforming the S&P 500's gain of 0.14% [1] - Over the past month, APA shares have decreased by 4.28%, while the Oils-Energy sector gained 2.89% and the S&P 500 increased by 3.97% [1] Upcoming Earnings - APA's earnings report is scheduled for August 6, 2025, with an expected EPS of $0.54, indicating a 53.85% decline year-over-year [2] - Revenue is anticipated to be $2.04 billion, representing a 27.01% decrease from the same quarter last year [2] Full Year Projections - Zacks Consensus Estimates project full-year earnings of $2.95 per share and revenue of $8.8 billion, reflecting changes of -21.75% and -9.63% respectively from the prior year [3] Analyst Estimates and Rankings - Recent changes to analyst estimates for APA indicate a dynamic business outlook, with positive revisions suggesting optimism [3] - The Zacks Rank system, which includes estimate changes, currently ranks APA at 3 (Hold) [5] Valuation Metrics - APA's Forward P/E ratio is 6.81, which is below the industry average of 11.44 [6] - The company has a PEG ratio of 6.49, compared to the industry average of 1.59 [7] Industry Context - The Oil and Gas - Exploration and Production - United States industry, which includes APA, has a Zacks Industry Rank of 190, placing it in the bottom 24% of over 250 industries [8]

Core Insights - APA Corporation has curtailed natural gas and NGL production in response to declining U.S. natural gas prices, reducing output by approximately 10 million cubic feet per day and 750 barrels per day respectively [1][9] - The company anticipates a significant drop in realized prices for natural gas and NGL in the second quarter, expecting $1 per thousand cubic feet and $19.80 per barrel, marking declines of about 50% and 29% from the previous quarter [2][9] - APA completed the sale of its New Mexico assets for $575 million, which resulted in a production decrease of around 1,800 barrels of oil equivalent per day, reflecting the company's strategy to streamline its portfolio [3][9] - The company's actions indicate a focus on capital discipline and asset optimization amid ongoing price volatility in the energy sector [4] Production and Pricing - U.S. natural gas prices faced pressure due to rising supply and subdued demand, leading to APA's production cuts [2] - The anticipated realized price for oil in the second quarter is $64.85 per barrel domestically, while international markets show stronger prices at $66.20 per barrel [2] Strategic Moves - The divestment of non-core assets is part of APA's strategy to concentrate capital in areas with higher returns [3] - The company's dual approach of cutting low-margin volumes and monetizing assets demonstrates its intent to remain resilient in changing market conditions [4]

Core Insights - APA Corporation provided supplemental information regarding its second-quarter 2025 financial and operational results, indicating that actual results may vary based on various factors not identified in the release [1] Financial Performance - Estimated average realized prices for the second quarter of 2025 are as follows: - Oil in the United States: $64.85 per barrel - NGL in the United States: $19.80 per barrel - Natural Gas in the United States: $1.00 per Mcf - Oil internationally: $66.20 per barrel - NGL internationally: $41.60 per barrel - Natural Gas internationally: $4.00 per Mcf [2] - The company reported a net gain on oil and gas purchases and sales (before tax) of approximately $158 million, which includes the impact of realized gain/loss from commodity derivatives [2] Production Update - APA curtailed approximately 10 million cubic feet per day (MMcf/d) of U.S. natural gas production and 750 barrels per day of U.S. natural gas liquids production in response to weak or negative Waha hub prices [3] Asset Sale Update - In May, APA announced an agreement to divest assets in New Mexico, which closed in June, resulting in a reduction of approximately 1.8 million barrels of oil equivalent per day (MBoe/d) in second-quarter U.S. production, with 33% being oil [4] - The total net proceeds from the asset sale, after customary closing adjustments and transaction costs, were approximately $575 million [4] Share Information - The estimated weighted-average basic common shares for the second quarter is 361 million [5] Upcoming Events - APA will host a conference call to discuss its second-quarter 2025 results on August 7 at 10 a.m. Central time, which will be webcast from the company's website [6]

Core Viewpoint - Investors are looking to enhance passive income through dividend-paying stocks that are currently undervalued, with Devon Energy, APA, and McDonald's being highlighted as notable options in July. Group 1: Devon Energy - Devon Energy's stock has declined by 31% over the past year, influenced by negative sentiment towards energy stocks and increased OPEC production [3] - The company offers a quarterly fixed dividend of $0.24, translating to an annual yield of over 3%, and is projected to generate $1.9 billion in free cash flow in 2025 even with oil prices at $50 per barrel [4] - Devon is expected to maintain cash flow for share buybacks of $200 million to $300 million per quarter and may consider a variable dividend, making it attractive for passive income investors [5] Group 2: APA - APA's stock has dropped 15% year-to-date, contrasting with a nearly 7% rise in the S&P 500, but it offers a forward dividend yield of 5.1% [6] - As a pure-play exploration and production company, APA is highly sensitive to energy price fluctuations, which have negatively impacted its stock [7] - The company is successfully reducing expenses, expecting a $150 million decrease in development capital and a $50 million reduction in exploration capital, with Q1 2025 free cash flow at $126 million compared to $99 million in Q1 2024 [9] Group 3: McDonald's - McDonald's has increased its dividend for 48 consecutive years and generates significantly more free cash flow than its dividend obligations, ensuring sustainability [11] - The franchise model allows McDonald's to operate capital-light, reducing variance in results and maintaining strong free cash flow even during downturns [13][14] - Despite a nearly 10% pullback from its all-time high, McDonald's maintains a reasonable valuation with a dividend yield of 2.4%, although it faces challenges in expanding its market presence [15][16][17]

Core Viewpoint - The analysis expresses interest in APA Corporation's Suriname offshore project while maintaining skepticism about the company's near-term performance [1]. Company Analysis - The analyst has a beneficial long position in APA shares, indicating confidence in the company's potential [2]. - The analysis is based on the analyst's professional background in the Nuclear Power industry, which aids in evaluating energy-related equities [1]. Investment Strategy - The focus is on income-producing equities and rental real estate properties for cash flow and long-term appreciation [1].