Diamondback Energy Inc. (NASDAQ: FANG) stock has almost recovered all its pre-market losses after delivering its Q4 2025 earnings report on Feb. 23. The headline numbers were mixed, with a slight earnings miss offset by a topline beat. However, the company issued cautious guidance that may have dampened initial enthusiasm.
It’s a good reminder that underpromising and overdelivering is something investors love... once companies reach the overdelivering stage. Nevertheless, there was a lot to like in Diamondback’s report, which included a more optimistic view on the supply-demand outlook for crude oil in 2026.
Diamondback believes that demand will continue to be resilient. Nevertheless, the company delivered a cautious first read of its 2026 guidance, which puts output roughly in line with the final three months of 2025. But that forecast may not account for the potential that crude oil prices could rise in the coming months.
Disciplined Production Could Support Higher Oil Prices
As of this writing, the April contract price of West Texas Intermediate (WTI) crude oil is $65.94. That’s about 20% above the price at the beginning of the year. It’s also about 40% above where some analysts had expected.
This is important when looking at Diamondback’s earnings report. Rising crude oil prices have lifted the entire energy sector. But expectations of a supply glut continue to hang over the sector. That’s particularly true of oil companies that are responsible for getting oil out of the ground.
But in its report, Diamondback noted that demand has remained resilient. Which means that December 2025 may have put a floor under crude oil prices.
Several factors in Diamondback's presentation support the case for a sustained move higher in crude. First, the company's own 2026 production guidance of 500–510 Mbo/d represents only modest growth from 2025 levels, signaling a disciplined industry-wide posture that could keep supply from overwhelming demand.
Second, Diamondback's scenario analysis shows that even at $70 per barrel, the company expects to generate over $5.5 billion in free cash flow. That figure implies that management sees meaningful upside from current prices as a realistic base case, not a stretch target.
There's also a structural gas story unfolding that could indirectly support oil prices. Diamondback is aggressively expanding its long-haul gas pipeline commitments. Specifically, the company has raised its forecast from roughly 350,000 MMBtu/d today to 800,000 MMBtu/d by Q4 2026. This would reduce the WAHA pricing drag that has historically weighed on Permian producers' realizations. As that headwind fades, the economics of Permian production improve, reinforcing the case for continued capital discipline across the basin. Fewer wells drilled industry-wide means tighter supply, which tends to push prices higher.
Dividend Growth Reinforces Long-Term Investor Appeal
The cyclical nature of energy stocks, and oil stocks in particular, is a reason why many of these stocks pay attractive dividends.
A highlight of Diamondback’s report was its announcement of a 5% increase in its quarterly dividend. That made it seven consecutive years of dividend increases for the company.
Better still, that dividend appears to be well supported by the company’s growing free cash flow (FCF).
Plus, the company says the dividend is safe and protected as long as crude oil prices remain above approximately $37 per barrel.
Diamondback also announced that it had repurchased approximately 2.9 million shares in Q4.
The company has approximately $2.3 billion remaining on its authorized $8 billion share repurchase program.
Technical Indicators Point to Consolidation, Not Reversal
On Feb. 20, which was the last trading day before its earnings report, FANG stock popped to its 52-week high. That was the culmination of a rally that started at the beginning of the year.
That's been true of many energy stocks, which have been stuck in neutral for the last few years as demand hasn't kept up with record output. That meant any slip, like the slight miss on earnings, was likely to cause the stock to slip.
Volume is slightly above average on the day, and it appears that the initial slip was due to algorithmic trading. That dip is being bought by traders midway through the session.
FANG stock has managed to stay above its ascending 20-day simple moving average (SMA). The Bollinger Bands are worth noting here. The upper band sits at $177.50 while the lower band is at $157.07, and the stock at $173.51 is trading in the upper half of that range, reflecting the recent bullish momentum.
The moving average convergence/divergence (MACD) also tells a broadly constructive story, with the MACD line at 5.21 remaining above its signal line at 4.82, though the narrowing gap between the two suggests that near-term momentum may be fading. That said, momentum appears to be slowing, which could mean the stock could pull back toward the SMA—currently around $167.29—before making its next move.
The Diamondback Energy analyst forecasts on MarketBeat give the stock a consensus price target of $187.33, which is an 8% gain from its price as of this writing. Since the beginning of the year, sentiment has been bullish. That trend has continued post-earnings with TD Cowen upgrading FANG stock to a Strong Buy.
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The article "Diamondback Sees Resilient Demand Despite Cautious Guidance" first appeared on MarketBeat.
