SM Energy Co. SM is facing falling energy prices as the end of 2024 approaches. Analysts are cutting earnings estimates on this Zacks Rank #5 (Strong Sell) as a result.

SM Energy is an independent energy company which explores and produces crude oil, natural gas and NGLs in Texas and Utah. It has a market cap of $5.2 billion.

Analysts Cut SM Energy’s Earnings Estimates in the Last Month

With energy companies which explore and produce crude oil, the price of oil plays a big factor in earnings. Most of these companies are unhedged on oil, which means they have not paid to make sure they get a certain price per barrel.

They are rolling with the market, on the belief that oil prices will remain higher.

But oil prices have come down from around $80 a barrel to $70 to $75.

As a result, 2 earnings estimates have been cut on SM Energy over the last month for 2024 and 3 estimates have been cut for 2025.

Although, interestingly, although oil remains depressed in the $70 to $75 range, one estimate has been raised in the last week for both 2024 and 2025.

But the Zacks Rank looks at the agreement between analysts and more have been cutting than raising.

The Zacks Consensus Estimates Have Fallen

In the last 30 days, the 2024 Zacks Consensus Estimate has fallen to $7.06 from $7.57 as the earnings estimates have been cut. But that is still earnings growth of 19.9% as the company made just $5.89 last year.

The 2025 Zacks Consensus Estimate has also fallen to $8.03 from $9.50 over the last month. But that is also another 13.8% growth if the 2024 earnings holds up around the consensus.

Here’s what the earnings looks like on the price and consensus chart. It’s fallen, but it’s not plunging year-over-year either.

Image Source: Zacks Investment Research

Shares of SM Energy Underperforming in 2024 But It’s Cheap

The energy stocks have struggled in 2024. Year-to-date, SM Energy is underperforming the S&P 500 but it’s still up on the year.

Image Source: Zacks Investment Research

SM Energy is dirt cheap, however.

It has a forward P/E of just 6.5. Any stock trading under 10x Is a value stock.

SM Energy also has a price-to-book (P/B) ratio of 1.4. A P/B ratio under 3.0 indicates value.

SM Energy is shareholder friendly. In June 2024, the company’s board raised the fixed quarterly dividend 11%, as of Q4 2024. It is currently yielding 1.6%. It also authorized a $500 million share repurchase program which is good until the end of 2027.

SM Energy will report third quarter 2024 earnings on Oct 31, 2024, after the close.

Investors might want to wait for crude prices to rise before considering an energy play. SM Energy is one to keep on the watch list for changes to the Zacks Rank.