Will Gulfmark Offshore (GLF) Earnings Miss Estimates in Q2? - Analyst Blog

By Zacks Equity Research,

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Gulfmark Offshore Inc. ( GLF ) - which provides offshore oilfield services to the oil and gas upstream firms − is set to release its second-quarter 2014 financial results after the closing bell on Jul 21.  

Last quarter, the company had delivered an impressive 16.7% positive earnings surprise. Let's see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

The prospect of offshore oil and gas field service providers are closely linked with the prices of crude oil and natural gas. The favourable pricing environment of the commodities encourages upstream companies to explore and produce more oil and natural gas, which in turn creates demand for oilfield services.

During the second quarter, crude oil traded over the $100 per barrel mark. This most probably gave confidence to the upstream firms for conducting exploration and production activities and hence created demand for oilfield services. This brought good news for Gulfmark Offshore.

However, we don't think the pricing environment for natural gas was much favourable. After reaching a price as high as $8.15 per million British thermal unit level during the first quarter - primarily due to a harsh and prolonged winter - the price of natural gas was trading below $5.00 during the entire second quarter. This is expected to hamper the profit margin of Gulfmark Offshore to quite an extent. Moreover, we are also concerned about the increasing direct operating cost of the company - which has been growing at an increasing pace for the last two years.

Earnings Whispers?

Our proven model does not conclusively show that Gulfmark Offshore is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This leads to an ESP of -5.21% for Gulfmark Offshore as the Most Accurate estimate stands at 91 cents while the Zacks Consensus Estimate is pegged higher at 96 cents.

Zacks Rank: Gulfmark Offshore has a Zacks Rank #4 (Sell). We caution investors against the stock going into the earnings announcement, as a Zacks Earnings ESP of -5.21% combined with a Zacks Rank #4 deters us from being confident of an earnings surprise.

Stocks to Consider

Here are some companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

Swift Energy Co. ( SFY ), with Earnings ESP of +150.00% and a Zacks Rank #1 (Strong Buy).   

Clayton Williams Energy Inc. ( CWEI ), with Earnings ESP of +4.97% and a Zacks Rank #1.  

RPC Inc. ( RES ), with Earnings ESP of +7.69% and a Zacks Rank #2 (Buy). 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

WILLIAMS(C)ENGY (CWEI): Free Stock Analysis Report

RPC INC (RES): Free Stock Analysis Report

GULFMARK OFFSHR (GLF): Free Stock Analysis Report

SWIFT ENERGY CO (SFY): Free Stock Analysis Report

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Zacks Investment Research

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

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: C , CWEI , RES , GLF , SFY

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