The Beach Energy Ltd (ASX: BPT) share price is plummeting today, falling 10% into the red at the time of writing to $1.46.
Following the release of the oil and gas company’s half-year results yesterday, investors and analysts have had time to digest the more salient points from the update — and it appears Beach might have missed expectations.
Why’s Beach Energy share price tracing lower today?
Whilst the oil and gas player came in with a fairly robust set of results, it missed the mark on others. For instance, EBITDA growth of 26% led to an EBITDA margin of 65%.
As a result, net profit after tax (NPAT) grew 66% over the same time last year, enabling the board to declare a 1 cent per share dividend.
However, the company missed on earnings per share (EPS) estimates – a fact that generally plagues a company’s share price in the weeks following.
Analysts were banking on Beach attaining an adjusted EPS of 10.62 cents per share, up from a realised 10.28 cents a share in H1 FY22.
However, the company posted an adjusted EPS of 9.34 cents, 12% below the consensus number.
Earnings results are incredibly important in determining the direction of a company’s future share price. Research corroborates that over the long term, the growth in global stock indices is primarily driven by company earnings growth.
Moreover, as legendary Fidelity fund manager Peter Lynch alludes to in his book One up on Wall St, the market prices stock on a combination of past earnings history and future earnings expectations.
Research also shows that companies who report EPS figures that miss the consensus estimate will see a decline in their share price in the weeks following. It’s a pattern known as ‘post-earnings announcement drift’, or PEAD.
Hence, with Beach Energy reporting weaker-than-expected EPS, it appears the market is conforming to this pattern today.
Aside from this, analysts at Macquarie and Canaccord Genuity both downgraded the company from buys today. Macquarie slashed its price target to $1.50 and rated Beach to underperform.
Meanwhile, Canaccord analyst James Bullen assigned a hold rating on the stock and valued the company at $1.66 per share today.
Beach Energy share price snapshot
In the last 12 months, the Beach Energy share price has struggled, having lost 12% in value across that time.
This year to date, things are turning around with the company’s shares climbing more than 17% since January 4. Even with today’s hammering, they’ve gained more than 5% during the last month alone.
The post Not so sunny: why the Beach Energy (ASX:BPT) share price is sinking 10% today appeared first on The Motley Fool Australia.
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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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