$ AAPL

$ ABBV

$ ABNB

$ ACGL

$ ADI

$ ADM

$ ADP

$ ADSK

$ AEE

$ AEP

$ AES

$ AFL

$ AIG

$ AIZ

$ AJG

$ AKAM

$ ALB

$ ALGN

$ ALL

$ AMAT

$ AMCR

$ AMD

$ AME

$ AMGN

$ AMP

$ AMT

$ AMZN

$ ANET

$ AOS

$ APA

$ APD

$ APO

$ APTV

$ ARE

$ ATO

$ AVB

$ AWK

$ AXON

$ BA

$ BALL

$ BAX

$ BBY

$ BDX

$ BEN

$ BG

$ BIIB

$ BKNG

$ BLDR

$ BMY

$ BR

$ BRO

$ BXP

$ CAG

$ CAH

$ CARR

$ CAT

$ CBOE

$ CBRE

$ CCL

$ CDNS

$ CDW

$ CEG

$ CF

$ CHD

$ CHRW

$ CI

$ CINF

$ CL

$ CLX

$ CMCSA

$ CMG

$ CMI

$ CMS

$ COIN

$ COO

$ COP

$ COR

$ CPAY

$ CPT

$ CRL

$ CRWD

$ CSCO

$ CTRA

$ CTSH

$ CTVA

$ CVS

$ CVX

$ CZR

$ DAL

$ DASH

$ DAY

$ DD

$ DDOG

$ DE

$ DELL

$ DG

$ DGX

$ DIS

$ DOC

Coterra Energy posted strong Q2 2025 revenue and production growth, but missed EPS estimates; cost discipline and raised guidance highlight operational strength despite margin concerns.

# Coterra Energy Delivers Strong Q2 2025 Revenue Beat Amidst EPS Miss; Production Growth and Margin Discipline in Focus

---

## Executive Summary

- **Coterra Energy posted a robust Q2 2025 revenue of $1.965B, beating consensus by 12.8%,** driven by a 17% YoY increase in total production and a standout 45% YoY surge in oil output.  
- **Adjusted EPS of $0.48 missed the $0.52 consensus by 7%,** despite GAAP EPS reaching $0.67, highlighting some margin pressure even as top-line growth excelled.  
- **Operating margins remained strong at 36% and net margins at 27.1%,** underpinned by disciplined cost control and a stable unit operating cost of $9.34/BOE.  
- **Management struck a bullish tone, raising production guidance and lowering capex,** while signaling operational flexibility in response to potential gas price volatility.  
- **Key risks include margin compression and commodity price sensitivity,** but the market may be underappreciating Coterra’s cost discipline and production momentum.  
- **Catalyst watch:** Monitor upcoming gas price trends and the next production update, as well as any further capital return announcements.

---

## Performance Snapshot

| Metric                | Reported   | Consensus | Surprise   | YoY Change |
|-----------------------|------------|-----------|------------|------------|
| Revenue               | $1.965B    | $1.742B   | +12.8%     | +17%       |
| Adjusted EPS          | $0.48      | $0.52     | -7.7%      | -          |
| GAAP EPS              | $0.67      | -         | -          | -          |
| Total Production      | 768 MBoepd | 740 MBoepd| +3.8%      | +17%       |
| Oil Production        | -          | -         | -          | +45%       |
| Unit Operating Cost   | $9.34/BOE  | -         | -          | Stable     |
| Operating Margin      | 36%        | -         | -          | -          |
| Net Margin            | 27.1%      | -         | -          | -          |

---

## Earnings Quality

Coterra Energy’s Q2 2025 earnings quality was characterized by a **favorable revenue mix**, with oil and natural gas volumes both contributing to the top-line beat. **Operating and net margins remained robust** at 36% and 27.1%, respectively, reflecting effective cost management and capital discipline. The **unit operating cost of $9.34/BOE** was stable, supporting profitability even as EPS lagged consensus. The divergence between strong sales growth and the EPS miss suggests some pressure from either realized pricing or non-operating items, but overall profitability remains solid.

---

## Management Commentary & Guidance

Management’s tone on the earnings call was **confident and optimistic**, emphasizing **capital efficiency, production strength, and consistent shareholder returns**. The company **raised its production guidance midpoint from 740 to 768 MBoepd** and **lowered capex guidance**, signaling both operational momentum and prudent capital allocation. Management also highlighted operational flexibility, noting the ability to curtail production if gas prices weaken, which demonstrates a balanced approach to risk and opportunity.

---

## Key Risks

- **Margin Pressure:** The EPS miss, despite strong revenue, points to potential margin compression if cost inflation or weaker commodity prices persist.
- **Commodity Price Sensitivity:** Coterra’s production and earnings remain exposed to fluctuations in oil and natural gas prices, which could impact future volumes and profitability.
- **Regulatory/Market Risks:** Any adverse regulatory developments or demand-side shocks could further pressure margins or limit growth.

---

## Expected Market Reaction

Analyst and investor sentiment is likely to be **cautious**, with a focus on the EPS miss and margin outlook despite the strong revenue and production performance. The market may initially discount the headline beat, instead scrutinizing forward guidance and capital return policies. However, **Coterra Energy’s cost discipline and production growth could be underappreciated** if commodity prices stabilize or improve.

---

## Final Takeaway

**Coterra Energy delivered a fundamentally strong Q2 2025, with standout revenue and production growth, disciplined cost control, and robust margins.** While the EPS miss and potential for margin compression warrant attention, the company’s operational flexibility and prudent capital management position it well for future volatility. The market may be underpricing Coterra’s ability to sustain high production and margins, especially if gas prices recover.

**Upcoming catalysts:**  
- Next production and capex update  
- Gas price trends and potential capital return announcements

Overall, this was a **solid quarter** for Coterra Energy, with operational strengths outweighing near-term earnings volatility.

CTRA: Production Growth Outshines EPS Miss in Q2

Coterra Energy is set for continued margin expansion in Q2 FY2025, driven by cost discipline, stable production, and potential upside from faster Harkey well remediation.

# Coterra Energy Inc. Q2 FY2025 Earnings Outlook: Margin Expansion, Operational Discipline, and the Underappreciated Cost Lever

## Executive Summary

We maintain a **Bullish** outlook for Coterra Energy Inc. (NYSE: CTRA) heading into Q2 FY2025, underpinned by **sustained margin expansion** and **robust operational efficiency**. Q1 FY2025 saw total revenue of **$1.904 billion** and a notable operating margin of **36.9%** (up from 30.7% YoY), with Q2 guidance suggesting continued strength in both production and cost control. Management’s disciplined capital allocation and constructive stance on natural gas pricing further support the case for outperformance. However, the market may be underestimating the **potential upside from accelerated Harkey well remediation**, which could provide an incremental cost tailwind if resolved ahead of schedule.

## Recent Trends Signal What’s Next

Coterra’s last two quarters have established a clear trajectory of **margin improvement and stable production**. Q1 FY2025 revenue of **$1.904 billion** was up sequentially, while gross and operating margins expanded on both a YoY and QoQ basis. Production volumes reached **746.8 MBoepd** in Q1, and Q2 guidance of **710–760 MBoepd** signals management’s confidence in maintaining output. Cost discipline is evident, with Marcellus drilling costs down **22% YoY** and Permian drilling/completion costs down **10%**.

### Quarterly Financial Trend Table

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | EPS ($) |
|--------------|--------------|------------------|----------------------|---------------|---------|
| Q3 FY2024    | 1.82         | 54.1             | 32.5                 | 22.0          | 0.52    |
| Q4 FY2024    | 1.87         | 55.0             | 34.2                 | 23.5          | 0.56    |
| Q1 FY2025    | 1.90         | 56.3             | 36.9                 | 25.1          | 0.61    |
| Q2 FY2025E   | 1.91–1.97    | 56–58            | 35–38                | 24–26         | 0.60–0.66|

**Trend:** Revenue and margins have steadily improved, with Q2 expected to continue this trajectory, albeit at a moderated pace.

## Management’s Forward Tone and Positioning

Management’s Q1 FY2025 commentary was **cautiously optimistic**, emphasizing “flexibility” and “capital discipline” amid commodity price volatility. Notable quotes include:

- “We’re seeing early signs of normalization in demand, particularly in natural gas.”  
- “Our capital program remains flexible, allowing us to adapt to market conditions.”  
- “We are maintaining a conservative approach to oil guidance given ongoing uncertainty.”

Compared to prior quarters, the tone has shifted from defensive to **measured optimism**, especially regarding natural gas pricing and operational efficiency. The explicit Q2 production guidance of **710–760 MBoepd** and capex of **$575–$650 million** reflect a commitment to disciplined growth and margin protection.

## KPI Trends & Upcoming Quarter Drivers

The following KPIs are most relevant for Q2 FY2025:

- **Production Volumes:** Q1 actual was **746.8 MBoepd**; Q2 guidance is **710–760 MBoepd**.  
- **Drilling Cost per Foot (Marcellus):** Down to **$800** (22% YoY reduction).  
- **Capex:** Q1 at **$552 million**; Q2 guided to **$575–$650 million**.

### KPI Movement Table

| KPI                        | Q2 FY2024 | Q1 FY2025 | Q2 FY2025E | YoY Change | QoQ Change |
|----------------------------|-----------|-----------|------------|------------|------------|
| Production (MBoepd)        | 735       | 746.8     | 710–760    | +3%        | Flat       |
| Drilling Cost/ft (Marcellus)| $1,025    | $800      | $800       | -22%       | Flat       |
| Capex ($M)                 | 540       | 552       | 575–650    | +7–20%     | +4–18%     |

**Implication:** Stable production and lower drilling costs should support margins, while higher capex signals investment in future growth.

## Missed by the Street

A key overlooked signal is the **potential for faster-than-expected Harkey well remediation**. Management described the issue as “solvable” and “non-material,” but the timing of resolution could meaningfully impact Q2 operating costs. If resolved early, this could provide a **surprise margin tailwind** not fully reflected in consensus models.

## Scenarios for the Upcoming Quarter

### Scenario Table

| Scenario | Revenue ($B) | EPS ($)   | Operating Margin (%) | Key Assumptions                                                                 |
|----------|--------------|-----------|----------------------|---------------------------------------------------------------------------------|
| Bull     | 1.97         | 0.66      | 38                   | Upper-end production (760 MBoepd), commodity price rebound, rapid cost efficiency gains |
| Base     | 1.94         | 0.62      | 36.9                 | Mid-guidance production, stable commodity prices, expected cost trends maintained      |
| Bear     | 1.91         | 0.60      | 35                   | Lower production (710 MBoepd), further oil price declines, delayed cost improvements   |

**Most Likely:** The **Base case** is most probable, given current production guidance, cost trends, and management’s balanced tone. Upside exists if Harkey remediation is completed early or if natural gas prices surprise to the upside.

## Appendix – Data Tables & Management Quotes

### Quarterly Revenue, EPS, and Margin Trends

| Quarter      | Revenue ($B) | EPS ($) | Operating Margin (%) |
|--------------|--------------|---------|----------------------|
| Q3 FY2024    | 1.82         | 0.52    | 32.5                 |
| Q4 FY2024    | 1.87         | 0.56    | 34.2                 |
| Q1 FY2025    | 1.90         | 0.61    | 36.9                 |
| Q2 FY2025E   | 1.91–1.97    | 0.60–0.66| 35–38                |

### KPI Movement Table

| KPI                        | Q2 FY2024 | Q1 FY2025 | Q2 FY2025E | YoY Change | QoQ Change |
|----------------------------|-----------|-----------|------------|------------|------------|
| Production (MBoepd)        | 735       | 746.8     | 710–760    | +3%        | Flat       |
| Drilling Cost/ft (Marcellus)| $1,025    | $800      | $800       | -22%       | Flat       |
| Capex ($M)                 | 540       | 552       | 575–650    | +7–20%     | +4–18%     |

### Key Management Quotes

| Quote                                                                 | Source                  | Interpretation/Risk Implication                                 |
|-----------------------------------------------------------------------|-------------------------|-----------------------------------------------------------------|
| “We’re seeing early signs of normalization in demand, particularly in natural gas.” | Q1 2025 Earnings Call   | Implies potential upside to realized prices and revenue.         |
| “Our capital program remains flexible, allowing us to adapt to market conditions.” | Q1 2025 Earnings Call   | Signals readiness to adjust spend if commodity prices shift.     |
| “We are maintaining a conservative approach to oil guidance given ongoing uncertainty.” | Q1 2025 Earnings Call   | Indicates risk aversion to oil price volatility.                 |
| “Drilling and completion costs in the Permian are down 10% YoY.”      | Q1 2025 Earnings Call   | Highlights ongoing cost discipline and margin support.           |
| “The Harkey well remediation is solvable and non-material.”           | Q1 2025 Earnings Call   | Suggests potential for positive cost surprise if resolved early. |
| “We expect capex to be in the $575–$650 million range for Q2.”        | Q1 2025 Earnings Call   | Confirms continued investment in growth assets.                  |
| “We’re constructive on natural gas pricing for the balance of the year.” | Q1 2025 Earnings Call   | Points to possible revenue tailwind if market conditions hold.   |

---

**Bottom Line:** Coterra Energy is positioned for another quarter of margin strength and operational outperformance, with the potential for positive surprises if cost levers materialize faster than consensus expects. The risk/reward skews favorably, provided commodity prices remain stable and integration execution stays on track.

CTRA Q2 Margin Expansion and Cost Tailwinds