How Should You Play Devon Stock Before Q4 Earnings Release?

Core Viewpoint - Devon Energy Corporation (DVN) is anticipated to show an increase in revenues but a decrease in earnings when it reports its 2024 results on February 18, after market close [1]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for DVN's fourth-quarter revenues is $4.24 billion, reflecting a growth of 2.2$1.00 per share, indicating a decline of 29.08% from the year-ago figure [2]. - For the current quarter (ending December 2024), the Zacks Consensus Estimate for earnings is $1.00, with a year-over-year growth estimate of -29.08$1.08 and a low estimate of $0.94 [3]. Earnings Surprise History - DVN has consistently beaten the Zacks Consensus Estimate in the last four quarters, with an average surprise of 4.99$1.5 billion, which is likely to lower annual interest expenses and boost earnings [10]. - Effective cost management and cash flow generation have allowed for share buybacks, positively impacting earnings [11]. Price Performance and Valuation - DVN shares have decreased by 13.7% over the past three months, compared to a 20.1% decline in the industry [14]. - The current trailing 12-month EV/EBITDA for DVN is 4.16X, significantly lower than the industry average of 11.39X, indicating relative undervaluation [15]. Investment Thesis - Devon's productive multi-basin assets and the acquisition of Grayson Mill Energy are expected to sustain high-margin production and strong free cash flow [17]. - The company is focused on reducing debt and lowering interest expenses, which will enhance financial flexibility [17]. - The competitive oil and gas industry may pose challenges for Devon in acquiring new drilling rights or properties [18]. Summary - Devon's high-quality domestic assets and balanced exposure to oil, natural gas, and NGL production, along with a low-cost production structure, are expected to enhance margins [19]. - The company is currently trading at a discount, making it an attractive option for investors [19].