5 Energy Stocks Poised to Beat Estimates in Q4 Earnings

The oil/energy space is in the initial phase of the fourth-quarter earnings season, with reports from only around 8.2% S&P 500 members on board. Given that most of the leading energy players are yet to come up with their results, let’s take a look at the movement of oil and gas prices during the quarter. This is because the prices of these commodities have a direct impact on the performance of energy players.   

Oil Price Recovery in Q4

The fourth quarter of 2016 was definitely favorable for the energy sector as OPEC agreed to cut output for the first time since 2008 with an aim of recovering oil. It is a well-documented fact that the commodity has been weak for more than two years owing to oversupply amid lackluster demand. Adding to the optimism, oil producers outside the cartel also came forward for the first time in 15 years to strike the historic deal with OPEC and jointly curb production.  

Following these landmark measures, oil improved through December and traded mostly above the psychological mark of $50 per barrel mark. We note that December crude pricing environment has advanced on both year-over-year and sequential basis.

Improved Gas Prices in Q4

Natural gas prices also improved substantially from the 17-year lows of around $1.6 per million British thermal units (MMBtu) during the first quarter 2016. In fact, the commodity price touched the psychological mark $3 per MMBtu and traded above this level throughout December, primarily due the forecast of colder temperature.

Also, the pricing scenario was much better than the previous year and the prior quarter.

Impact on Energy Players

Oil and gas prices are the key determinants of the fate of energy players. No doubt, the improvement in the commodity pricing scenario was favorable for exploration and production (E&P) companies as they could sell the products at increased prices. Moreover, increased E&P operations should raise the demand for drilling and oilfield services companies to efficiently set up oil and gas wells.

The midstream players are also poised to gain as the surge in production would lead to higher demand for oil and gas transportation and storage assets. Hence, the quarter was favorable for energy companies.

How to Pick the Attractive Stocks?

Picking the most investment-worthy stock is undoubtedly a daunting task. This is where the Zacks methodology comes to the rescue. One could narrow down the list using the positive Earnings ESP as a guide, along with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Our Choices

New York-based Hess Corporation (HES) is a global upstream firm that engages in exploration, development, production and transportation of oil and gas. The company is likely to beat fourth-quarter earnings estimates as it has an Earnings ESP of +0.93% and a Zacks Rank #3. The company is expected to report fourth-quarter results before the opening bell on Jan 25.   

RPC Inc. (RES) – headquartered in Atlanta, GA – is the provider of a range of oilfield services in the global world. The company will likely report fourth-quarter results on Jan 25, before the opening bell. RPC Inc. is projected to beat the Zacks Consensus Estimate as it has an Earnings ESP of +7.69% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chevron Corporation (CVX) – based in San Ramon, CA – is one of the largest publicly traded oil and gas companies in the world, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.

The company will likely release fourth-quarter results on Jan 27. We expect the company to surpass expectations as it has an Earnings ESP of + 10.94% and a Zacks Rank #3.

Woodlands, TX-based Anadarko Petroleum Corporation (APC) is one of the largest independent oil and natural gas E&P companies of the world. The company will report fourth-quarter results on Jan 31, after the closing bell. We expect Anadarko will beat the Zacks Consensus Estimate as it carries a Zacks Rank #3 and an Earnings ESP of +10.87%.  

Enterprise Products Partners LP (EPD), a leading master limited partnership (MLP), is engaged in providing a wide range of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGL), and crude oil.

The partnership, with Zacks Rank #3 and Earnings ESP of +15.63%, is likely beat the Zacks Consensus Estimate reporting the fourth quarter. The company is slated to release its financial results before the opening bell on Jan 30.

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Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report
 
RPC Inc. (RES): Free Stock Analysis Report
 
Chevron Corp. (CVX): Free Stock Analysis Report
 
Anadarko Petroleum Corp. (APC): Free Stock Analysis Report
 
Hess Corp. (HES): Free Stock Analysis Report
 
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