Devon's Q4 Earnings Beat Estimates: Right Time to Buy the Stock?

Core Viewpoint - Devon Energy Corporation reported better-than-expected fourth-quarter 2024 earnings per share, driven by strong production volumes and new well productivity, despite a drop in realized commodity prices [1][4]. Financial Performance - Earnings per share for Q4 2024 was $1.16, surpassing the Zacks Consensus Estimate of $1.00 by 16% [3]. - Revenues also exceeded expectations, surpassing the Zacks Consensus Estimate by 3.9% [1]. - The company has consistently outperformed expectations in the last four quarters, with an average earnings surprise of 8.63% [2]. Production and Reserves - Net production in Q4 totaled 848,000 barrels of oil equivalent per day (Boe/d), a 28.1% increase year over year, exceeding the guided range of 811,000-830,000 Boe/d [4]. - Natural gas liquids production increased by 30.8% year over year to 221,000 barrels per day (Bbl/d), while oil production rose by 25.5% to 398,000 Bbl/d [5]. - In 2024, 415 million barrels of oil equivalent (MMBoe) were added to reserves, achieving a replacement rate of 154% of production [10]. Cost Management - Production costs averaged $11.30 per Boe in Q4, a decline of 1% from the prior period, with effective cost management driving per-unit rates 10% below guidance [7][13]. - The company is focused on reducing costs by selling higher-cost assets and optimizing production [13]. Shareholder Returns - Devon repurchased shares worth $301 million in Q4 and paid dividends of $144 million, with a 9% increase in the quarterly dividend for Q1 2025 [6]. - The new quarterly dividend rate will be 24 cents, and the company may buy back shares in the range of $200-$300 million per quarter in 2025 [6]. Market Position - Devon's stock has outperformed its industry in the past month, with a return on equity (ROE) of 22.52%, compared to the industry average of 15.82% [14][17]. - The company's shares are trading at a discount, with a trailing 12-month EV/EBITDA of 4.41X compared to the industry average of 11.54X [19]. Future Outlook - Devon expects total production of 805,000-825,000 Boe/d in 2025, supported by ongoing investments in higher-margin U.S. oil-producing regions [11]. - The Zacks Consensus Estimate for Devon's 2025 and 2026 earnings per share has increased by 2.3% and 2.6%, respectively, in the past 60 days [8].