Cimarex Energy Company: Value Stock Buy Alert

Cimarex Energy Company (XEC), an oil and gas exploration and production company, has surprised on estimates 4 consecutive quarters, yet the stock has retreated from recent highs as crude prices have fallen. XEC now trades at just 6.14x forward earnings.

Cimarex Surprised by 5.51% in the Second Quarter

On Aug 5, the company once again beat Wall Street estimates when it reported its second quarter earnings. Net income soared 191% to $229.3 million, or $2.68 per share, from $78.7 million, or 93 cents per share in the year ago period. Analysts expected $2.54 per share in the quarter.

Revenues jumped 81% to $588.7 million from $325.8 million a year ago.

Obviously, the revenue growth could be attributed to the surging crude and natural gas prices as crude rose during the quarter. Natural gas prices increased 45% to an average of $10.57 per thousand cubic feet (Mcf) and crude gained 98% to an average of $121.64 per barrel compared to the second quarter of 2007.

However, it’s not just pricing which is spurring the growth. The company has also been increasing production. In its second quarter report, XEC forecast full year 2008 production would be 9 - 12% higher than fiscal year 2007.

Cimarex’s fundamentals remain in place. 5 out of 6 covering analysts have raised estimates in the last 30 days for the full year to $9.25 from $8.32 per share. One analyst also lowered in the last week.

XEC remains a Zacks #1 Rank (Strong Buy)

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