ConocoPhillips (COP): What's in Store This Earnings Season?
ConocoPhillips COP, an upstream energy firm, will release third-quarter 2016 financial results on Oct 27, before the opening bell.
Last quarter, ConocoPhillips posted a negative earnings surprise of 27.42%. In the trailing four quarters, the company posted an average negative surprise of 14.21%. Let’s see how things are shaping up for this announcement.
Factors at Play
ConocoPhillips is one of the largest exploration and production players in the world, based on proved reserves and production. The company is an upstream energy player and hence generates revenues after selling oil and natural gas to refiners and downstream players. In other words, the pricing environment of crude primarily determines the fate of the energy player.
The crude pricing environment has been weaker than the third quarter of 2015. In fact, the company expects the third-quarter 2016 production level in the range of 1,510–1,550 thousand barrels of oil equivalents per day (MBOE/D). The expected production range is lower than the 1,554 MBOE/D produced during July to September period of 2015. Given that both production and oil pricing scenario are unfavorable for ConocoPhillips, we do not expect the company to outperform.
Earnings Whispers
Our proven model does not conclusively show that ConocoPhillips is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP is -3.08%. This is because both the Most Accurate estimate stands at a loss of 67 cents while the Zacks Consensus Estimate is pegged narrower at a loss of 65 cents.
Zacks Rank: ConocoPhillips has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
CONOCOPHILLIPS Price and EPS Surprise
CONOCOPHILLIPS Price and EPS Surprise | CONOCOPHILLIPS Quote
Stocks to Consider
Some stocks from the energy space which, according to our model, have the right combination of elements to post an earnings beat this quarter are:
Baker Hughes Inc. BHI has an Earnings ESP of +4.65% and a Zacks Rank #2. The company is expected to release third-quarter earnings results on Oct 25. You can see the complete list of today’s Zacks #1 Rank stocks here.
Spectra Energy Corp. SE has an Earnings ESP of +12.50% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Nov 2.
Enterprise Products Partners LP EPD has an Earnings ESP of +3.33% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Oct 27.
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