Domestic energy explorer
Comstock Resources Inc.
) is set to release its fourth-quarter 2012 results after the
closing bell on Monday, Feb 11.
In the preceding quarter, Comstock delivered a negative 92.31%
earnings surprise - the third earnings miss in a row - hamstrung
by depressed natural gas prices. Let's see how things are shaping
up prior to this announcement.
Factors to Consider This Quarter
Comstock's highly gas-weighted reserves/production profile,
along with its geographically concentrated asset base, is the key
area of concern. Additionally, the rise in net debt/reduction of
liquidity associated with the recent Delaware Basin acquisition
is a drag on the balance sheet.
Taking a cautious view of gas prices, the company's capital
program specifically focuses on the promising North American
liquids-rich areas, which is a major shift away from dry natural
gas development. However, with natural gas prices likely to
remain weak over the next one year or so, thereby pressuring
profitability, Comstock's ability to generate positive earnings
surprise will be limited.
In fact, the Zacks Consensus Estimate for the fourth quarter
has moved down by 6 cents to a loss of 30 cents per unit over the
last 30 days as the tendency for a downward estimate revision was
Our proven model does not conclusively show that Comstock
Resources is likely to beat the Zacks Consensus Estimate in the
fourth quarter. That is because a stock needs to have both a
positive Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1 (Strong Buy) or at least Zacks Rank #2
(Buy) or Zacks Rank #3 (Hold) for this to happen. Unfortunately
this is not the case here as elaborated below.
Negative Zacks ESP:
This is because the Most Accurate estimate stands at a loss of 34
cents, while the Zacks Consensus is narrower at a loss of 30
cents. This results in a difference of -13.33%.
Zacks Rank #3 (Hold):
Comstock Resources' Zacks Rank #3 (Hold), however, increases the
predictive power of ESP. That said, we also need to have a
positive ESP to be confident of an earnings surprise call.
Stocks to Consider
Here are some energy firms you may want to consider on the
basis of our model, which shows that they have the right
combination of elements to post an earnings beat this
Northern Tier Energy L.P.
), earnings ESP of +2.94% and Zacks Rank #1 (Strong Buy).
Hercules Offshore Inc.
), earnings ESP of +14.29% and Zacks Rank #2 (Buy).
), earnings ESP of +3.52% and Zacks Rank #2 (Buy).
COMSTOCK RESOUR (CRK): Free Stock Analysis
HERCULES OFFSHR (HERO): Free Stock Analysis
HOLLYFRONTIER (HFC): Free Stock Analysis
NORTHERN TIER (NTI): Free Stock Analysis
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