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Flood of Oil Stocks Earnings on Apr 26: HP, NOV and Others

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Results from 179 S&P 500 members are already out, bearing evidence to a strong start this earnings season.

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Per the latest Earnings Trends report dated Apr 20, 87 S&P 500 members have already reported results with their total earnings up 25% from the same period last year on 10.7% higher revenues. Notably, 82.8% of the firms surpassed the Zacks Consensus Estimate for earnings, while 67.8% topped revenue estimates.

So far, just five of the energy companies on the S&P 500 index have reported their Q1 results. These include Halliburton Company, Kinder Morgan, Inc., Schlumberger Limited, Baker Hughes and Hess Corporation.

Both the oilfield services players, Schlumberger and Halliburton met earnings estimates, indicating that the North American drilling market remains robust, driven by increased activity. Kinder Morgan delivered an earnings beat on the back of increased contribution from the liquid terminals and Texas Interstate System. Further, Baker Hughes and Hess Corporation also delivered better than expected results.

Year-over-Year Gain Leads to Bullish Expectations

A look back at the last earnings season reflects that earnings for the energy sector saw the strongest growth, recording a massive 136.6% year-over-year gain on 23.6% higher revenues.

Also, for the first quarter of 2018, we expect the energy sector to eclipse all the 16 Zacks sectors. Per our expectations, earnings for the sector are expected to jump 59.6% from first-quarter 2017, while the top line is likely to witness an improvement of 15.9% from the year-ago levels.

What’s Going in Favor of the Energy Sector

The first quarter of the year saw the U.S. oil benchmark attain its highest settlement since December 2014, despite record high domestic production. Per EIA data, the commodity rose about 7.5% in the first three months of 2018 to finish the quarter at $64.87 per barrel. It goes without saying that all oil-related stocks are thus poised to benefit from recovering commodity prices, as they will be able to extract more value for their products.

Crude was supported by various catalysts, including strong demand and continued production curb from OPEC and its allies. Needless to say, such favorable developments have buoyed investors’ optimism surrounding the sector’s first-quarter results.

Stocks’ Earnings to Watch on Apr 26

Let’s find out what’s in store for the below-mentioned five energy companies that are slated to release their quarterly numbers on Apr 26.

Contract drilling services provider Helmerich & Payne Inc. HP is expected to report fiscal second-quarter 2018 results before the opening bell.

In the preceding quarter, the company delivered a positive earnings surprise of 85.71% on the back of higher drilling activities at its U.S. Land Segment. Further, the company delivered an average positive earnings surprise of 37.06% in the last four quarters.

According to our quantitative model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase its odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that we caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Our proven model shows that Helmerich & Payne is likely to beat earnings estimates because it has the right combination of two key ingredients. The company has an Earnings ESP of +16.93% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recovering commodity prices along with higher rig utilization in Helmerich & Payne’s largest segment — U.S. Land segment — are expected to buoy the results this quarter also. The Zacks Consensus Estimate for Helmerich & Payne’s largest segment’s operating income is pegged at $27.51 million, up from the last quarter’s figure of $24.75 million and the year-ago quarter’s operating loss of $51.85 million. (Read More: Can Helmerich & Payne Deliver a Beat in Q2 Earnings?)

Pittsburgh, PA-based integrated energy company EQT Corporation EQT is slated to come up with January-March operational results before the opening bell.

As far as earnings surprises are concerned, EQT — an Appalachia-focused natural gas firm, with primary focus on production and midstream operations — has a decent record, having missed the Zacks Consensus Estimate just once in the last four reports.

For this quarter as well, our model predicts an earnings beat as it has a Zacks Rank #3 and Earnings ESP of +18.59%.

Per the Zacks Consensus Estimate, the average daily sales volume for the first quarter is pegged at 3,959 million cubic feet equivalent per day (MMcfe/d), higher than 3,200 MMcfe/d in the preceding quarter and 2,110 MMcfe/d in the year-ago quarter.

The Zacks Consensus Estimate for earnings in the Production segment is pegged at $371 million, reflecting an increase from $267 million in the last quarter and $257 million in the year-ago quarter.( Read more: EQT Corp Gears Up for Q1 Earnings: A Beat in Store?)

The largest independent refiner and marketer of petroleum products in the United States, Valero Energy Corporation VLO, is another company to come up with quarterly numbers before the opening bell.

The company boasts an excellent track record of having outperformed estimates in each of the last four quarters, with an average positive earnings surprise of 10.26%.

However, our model indicates that Valero Energy’s earnings streak might come to a halt this time around, as the company does not have the right combination of the two key ingredients. While the company carries a Zacks Rank #3, its negative Earnings ESP of 4.58% makes surprise prediction difficult.

While improved refining margins and tax reform benefits bode well for the downstream operator, unplanned downtime and weather-related issues might affect Valero’s bottom line in the first quarter of 2018. (Read More: What to Expect From Valero Energy in Q1 Earnings?)

Then there is Houston, TX-based exploration and production major, ConocoPhillips COP, coming up with first-quarter numbers tomorrow, before the opening bell.

ConocoPhillips has an average positive earnings surprise of 144.45% in the trailing four quarters. Our model indicates that the company is likely to beat on earnings this time around too, as it has a Zacks Rank #3 and an Earnings ESP of +0.62%.

Higher expectations for prices of natural gas, natural gas liquid and crude oil will likely favor the company’s first-quarter earnings.

Lastly there is Houston-based, National Oilwell Varco Inc. NOV, another energy company set to report results after the closing bell.  

Last quarter, the company met the Zacks Consensus Estimate of a loss of 4 cents. In the trailing four quarters, National Oilwell witnessed a positive earnings surprise of 6.9%, without missing any estimates.

Our proven model does not show that National Oilwell is likely to beat earnings estimates this quarter, as it has a Zacks Rank #3 and an Earnings ESP of -20.00%.

Apparently, National Oilwell even warned investors that its first-quarter 2018 revenues are expected to miss expectations primarily due to declined progress in new offshore rig construction as well as client-associated equipment deferrals. The company expects its revenues to come in at $1.8 billion in the first quarter, reflecting 3.4% year-over-year decline.

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