CHK - Chesapeake Energy - return on equity (ROE) of 18% also tops the industry’s average of 11%

Chesapeake Energy Corporation (CHK) is trading near a 52-week high after delivering a better-than-expected fourth quarter. Wall Street earnings forecasts are on the rise. Full-year 2008 estimates of $3.51 per share climbed from last month’s $3.38. CHK’s earnings per share are expected to grow 15% over the next 3 – 5 years, versus industry’s average of 10%.

Full Analysis

Chesapeake Energy Corporation is the largest independent and third-largest overall producer of natural gas in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and corporate and property acquisitions.

The company is known for growth through acquisitions, and is the most active driller of new wells in the U.S.

Chesapeake's production growth has been at or near the top of the industry for several years. After increasing 23% last year, volumes are expected to grow around 20% this year and in the mid-teens level in 2009.

CHK is trading near a 52-week high after delivering a reported better-than-expected fourth quarter as well as the full year. Chesapeake noted that 2007 results reflected strong production gains.

Fourth quarter earnings totaled 93 cents per share, compared to 90 cents per share in the prior-year period. The result came in 15% ahead of the consensus estimate.

Wall Street earnings forecasts are on the rise. Full-year 2008 estimates of $3.51 per share climbed from last month’s $3.38. For 2009, projections of $3.13 per share stand above the prior month’s $3.07. CHK’s earnings per share are expected to grow 15% over the next 3 – 5 years, versus industry’s average of 10%.

In addition to exhibiting solid growth, this Growth & Income pick offers a dividend yield of 0.6%, which higher than the industry averages as oil and gas companies do not generally pay dividends.

The company’s return on equity (ROE) of 18% also tops the industry’s average of 11%. Its net margin of 18.6% compares favorably to the industry’s average of 15.8%.

Content Courtesy: Zacks Investment Research

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