Domestic energy explorer
Comstock Resources Inc.
) is set to release its fourth quarter results after the closing
bell on Monday, Feb 10.
In the preceding three-month period, Comstock delivered a
negative 33.33% earnings surprise - the fourth underperformance
in as many quarters - hamstrung by a drop in natural gas output
amid lower drilling activity in the Haynesville and Bossier
wells. Let's see how things are shaping up prior to this
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. While subscribing to management's outlook, we
believe the realignment of Comstock will take some time to bear
results. Until then, 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 8 cents to a loss of 23 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 is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive
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 a loss of 24
cents, while the Zacks Consensus is narrower at a loss of 23
cents. This results in a difference of -4.35%.
Zacks Rank #3 (Hold):
Comstock's 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.
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.
Stocks to Consider
While earnings beat looks unlikely for Comstock, 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:
Breitburn Energy Partners L.P.
), with Earnings ESP of +3.57% and a Zacks Rank #2 (Buy).
Cheniere Energy Inc.
), with Earnings ESP of +17.86% and a Zacks Rank #2.
Energy Transfer Equity L.P.
), with Earnings ESP of +25.93% and a Zacks Rank #2.
BREITBURN EGY (BBEP): Free Stock Analysis
COMSTOCK RESOUR (CRK): Free Stock Analysis
ENERGY TRAN EQT (ETE): Free Stock Analysis
CHENIERE ENERGY (LNG): Free Stock Analysis
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