Where does changing sentiments on oil leave Ring Energy Inc. (NYSEMKT: REI)? The company appears perfectly positioned to ride the oil price recovery wave. Recent analyst adjustments of the company’s earnings estimates and stock movements in the recent months leave no doubt that REI is taking a cue from the oil market.
Oil prices have recovered significantly in the past months to sit near $50 a barrel from sub-$30 levels. The recovery in oil prices bodes well for Ring Energy Inc (NYSEMKT: REI) and fellow energy companies. Although OPEC members failed to reach an agreement to lower their crude output, the global oil supply glut appears to be correcting itself.
Coming on the back of austerity
The reason a recovery in oil prices will significantly benefit Ring Energy Inc (NYSEMKT: REI) is that during the price fallout, the company was among the drillers that sought to drop down costs. Therefore, the existing efficient operating structure should provide a favorable environment to turn a large portion of sales into profits.
Analysts see light at the end of the tunnel
Several analysts have recently commented on Ring Energy Inc (NYSEMKT: REI) with some reviewing their earnings estimates for the company. Over the last 30 days, two analysts have raised their current quarter EPS targets for REI. With that, the company’s average EPS estimate has improved to loss of $0.03 a share compared to a loss of $0.04 a share in the previous 30 days. That signals a 25% positive move in EPS estimate in a period of one month.
Ring Energy Inc (NYSEMKT: REI)’s EPS estimate for the current year has also gone up to a loss of $0.09 from a loss of $0.12 over a 30-day period.
Stock price movements
The improvements in REI’s EPS estimates correlate with the movements in the company’s stock price. Over the last 30 days, the stock price has increased more than 27% and is up more than 33% YTD.
In 1Q2016, Ring Energy Inc. (NYSEMKT: REI) generated revenue of $6.09 million, up from $6.04 million in the like quarter a year ago. Adjusted EPS loss of $0.06 compared with $0.04 a year earlier. The recent increase in oil prices should provide topline and bottom-line lift in the coming quarters.