Natural gas exploration and production (E&P) company
) is scheduled to report its fourth-quarter and full-year 2012
results on Thursday, Feb 14, 2013.
In the third quarter, the company delivered a negative 128.00%
earnings surprise, due to a depressing natural gas environment
and higher operating expenses. Moreover, Encana delivered
negative earnings surprises in 3 of the last 4 quarters, with an
average miss of 256.49%. Let's see how things are shaping
up prior to this announcement.
Factors to Consider This Quarter
Encana is well positioned for long-term growth based on its
collaboration with Mitsubishi in developing the Cutbank Ridge
-one of the most fertile and low-cost resource rich acreages in
North America. Additionally, we appreciate Encana's strategy of
disposing assets that do not fit into its long-term growth
However, 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 the alternate sustainable sources of energy
as these are environmentally friendly.
Also, Encana's extensive natural gas exposure makes it
sensitive to gas price fluctuations, compared to its more
diversified independent peers with higher oil production.
In fact, the Zacks Consensus Estimate for the fourth quarter
has moved down by 1 cent to 32 cents per share over the last 30
days as the tendency for a downward revision was obvious.
Our proven model does not conclusively show that Encana
Corporation is likely to beat the Zacks Consensus Estimate in the
fourth 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 Zacks Rank #2
(Buy) or 3 (Hold) for this to happen. But this is not the case
here as elaborated below.
Negative Zacks ESP:
This is because the Most Accurate estimate stands at 28 cents
while the Zacks Consensus Estimate is higher at 32 cents. This
results in a difference of -12.50%.
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.
Other Stocks to Consider
Here are some other companies 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
Atlas Energy L.P
), earnings ESP of +260.00% and Zacks Rank #1 (Strong Buy).
Northern Tier Energy LP
), earnings ESP of +2.94% and Zacks Rank #1 (Strong Buy).
Hercules Offshore Inc.
), earnings ESP of +14.29% and Zacks Rank #2 (Buy).
ENCANA CORP (ECA): Free Stock Analysis Report
NORTHERN TIER (NTI): Free Stock Analysis
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