Natural gas exploration and production (E&P) company
) is scheduled to report its first-quarter 2013 results on
Tuesday, Apr 23, before the opening bell.
In the fourth quarter 2012, Encana delivered a negative 3.12%
earnings surprise, due to low natural gas volumes and hedging
loss. Moreover, Encana delivered negative earnings surprises in 3
of the last 4 quarters, with an average miss of 261.96%. Let's
see how things are shaping up prior to this announcement.
Factors to Consider This Quarter
As is the case with other E&P companies, Encana's results
are directly exposed to oil and gas prices, which are inherently
volatile and subject to complex market forces. Realized prices
could differ significantly from our estimates, thereby affecting
the company's revenues, earnings and cash flows.
Additionally, with the growing popularity of renewable sources
of energy such as wind and solar, the operators of natural gas
resources are facing tough competition. Although expensive, many
customers are opting this sustainable source of energy for its
environmental friendly nature.
Although, Encana focuses on the prolific unconventional
natural gas reservoirs throughout North America, the large scale
development of these resources is technically challenging and
Our proven model does not conclusively show that Encana is
likely to beat the Zacks Consensus Estimate in the first quarter.
That is because a stock needs to have both a positive earnings
Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3
(Hold) for this to happen. But this is not the case here as
Negative Zacks ESP:
This is because the Most Accurate estimate stands at 3 cents
while the Zacks Consensus Estimate is higher at 4 cents. This
results in a difference of -25.0%.
Zacks Rank #3 (Hold):
Encana's Zacks Rank #3, however, increases the forecasting power
of ESP. That said we also need to have a positive ESP to be
confident of an earnings surprise call.
We caution against stocks with Zacks Rank #4 and 5 (Sell rated
stocks) going into the earnings announcement, especially when the
company is seeing a negative estimate revisions momentum.
Other Stocks to Consider
Here are some E&P companies you might want to consider on
the basis of our model. These have the right combination of
elements to post an earnings beat this quarter:
Epl Oil & gas Inc.
)has an earnings ESP of +9.76% and a Zacks Rank #1 (Strong
Stone Energy Corp.
) has an earnings ESP of +2.86% and a Zacks Rank #1 (Strong
Bill Barrett Corporation
) has an earnings ESP of +50.0% and a Zacks Rank #2 (Buy).
BILL BARRETT CP (BBG): Free Stock Analysis
ENCANA CORP (ECA): Free Stock Analysis Report
EPL OIL&GAS INC (EPL): Free Stock Analysis
STONE ENERGY CP (SGY): Free Stock Analysis
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