Will Apache Corp. (APA) Miss Q1 Earnings? - Analyst Blog

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U.S. energy firm Apache Corp. ( APA ) is set to release its first quarter 2014 results before the opening bell on Thursday, May 8.

In the preceding three-month period, Apache delivered a negative 13.3% earnings surprise - the third underperformance in the last 4 quarters - as asset sales reduced production. Let's see how things are shaping up for this announcement.

Factors to Consider This Quarter

A decline in volume levels is a major concern for Apache, as evident from last year's statistics. The output of oil and natural gas averaged 760,775 oil-equivalent barrels per day in 2013, down approximately 2.3% year over year. We expect the declining trend to continue for the to-be-reported quarter as well.

As it is, Apache'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 flow.

In fact, the Zacks Consensus Estimate for the first quarter has moved down by 4 cents to a profit of $1.63 per share over the last 30 days as the tendency for a downward estimate revision was more obvious.

Earnings Whispers?

Our proven model does not conclusively show that Apache is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 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 $1.62, while the Zacks Consensus is higher at $1.63. This results in an ESP of -0.61%.

Zacks Rank #3 (Hold): Apache carries a Zacks Rank #3 (Hold), which when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

While earnings beat looks uncertain for Apache, 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 quarter:

Unit Corp. ( UNT ) has an Earnings ESP of +2.70% and holds a Zacks Rank #1 (Strong Buy). Unit Corp. will report first quarter earnings on May 8.

Canadian Natural Resources Ltd. ( CNQ ) has an Earnings ESP of +9.59% and holds a Zacks Rank #2 (Buy). Canadian Natural Resources will report first quarter earnings on May 8.

Callon Petroleum Co. ( CPE ) has an Earnings ESP of +25.00% and holds a Zacks Rank #2 (Buy). Callon Petroleum will report first quarter earnings on May 8.



APACHE CORP (APA): Free Stock Analysis Report

CDN NTRL RSRCS (CNQ): Free Stock Analysis Report

CALLON PETE-DEL (CPE): Free Stock Analysis Report

UNIT CORP (UNT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: APA , CNQ , CPE , UNT

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