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Why this ASX Energy stock plummeted 11% on Friday

ASX Energy stock Z Energy Ltd (ASX: ZEL) was one of the worst performers on the ASX 200 on Friday.

The New Zealand-based energy company’s shares slumped 11.64% lower to Friday’s close after an earnings downgrade.

What did Z Energy announce last week?

The group revised its FY20 EBITDAF earnings guidance to be between $350 million and $385 million. From midpoint to midpoint, that’s a steep 11.56% discount on the previous $390 million to $430 million range.

The ASX energy stock went into freefall following the news after also lowering its dividend forecast. Z Energy now expects to pay $0.40 per share, down from previous guidance of $0.48 to $0.50 per share.

Shareholders reassessed the ASX energy company’s value following the news, which sent it to a new 52-week low of $4.01 per share.

What’s behind the group’s lower earnings?

Lower margins were the biggest factor in the group lowering its FY20 earnings figures. Retail trading conditions remain challenging for Z Energy with elevated price competition.

There has been a decline in both marketing and refining margins this year, which will reduce earnings for Q3 and Q4 2020. 

The group’s share price performance in 2019 reflects the tough conditions it faces at the moment. The ASX Energy stock was already down 10.33% in 2019 prior to Friday’s update as competition in the sector has intensified.

For context, the Beach Energy Ltd (ASX: BPT) share price is up 102.33% since 2 January while Origin Energy Ltd (ASX: ORG) shares have climbed 37.66% higher.

ASX Energy stocks are notoriously exposed to oil and gas prices, which can equal volatility. That’s certainly been the case for many of the top ASX-listed companies this year.

Foolish takeaway

Z Energy shares have struggled to post consistent gains this year and this earnings downgrade hasn’t helped that. The ASX Energy stock plummeted lower when the market opened and closed down 11.64% on Friday.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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