Can Helmerich & Payne (HP) Deliver a Beat in Q2 Earnings?

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We expect Helmerich & Payne, Inc. HP to beat expectations when it reports fiscal second-quarter 2018 results before the opening bell on Apr 26.

In the preceding quarter, the company delivered a positive earnings surprise of 85.71% on the back of higher drilling activity at its biggest segment - U.S. Land. Further, the company delivered an average positive earnings surprise of 37.1% in the last four quarters.

Let's see how things are shaping up for this announcement.

Helmerich & Payne, Inc. Price and EPS Surprise

Helmerich & Payne, Inc. Price and EPS Surprise | Helmerich & Payne, Inc. Quote

Estimate Revision Trend

Let's look at the estimate revision trend to get a clear picture of what analysts expect from the earnings release. The Zacks Consensus Estimate of a loss of 6 cents for the quarter under review has been stable over the last two months. It reflects a wider loss from 2 cents in the year-ago quarter.

Further, analysts polled by Zacks expect revenues of $562 million for the quarter, marginally down from $564 million in the prior-year quarter but up from $405.3 million in the year-ago quarter.

Factors at Play

Prices of oil at the end of January-March quarter of 2018 were $62.73 per barrel, up about 8.4% sequentially amid improving demand outlook and OPEC-production cut deal. This has resulted in an increase in onshore drilling activities in the United States. The Tulsa, OK-based drilling contractor is poised to benefit from recovering commodity prices.

The Zacks Consensus Estimate for operating revenues of Helmerich & Payne's largest segment - U.S. Land - is pegged at $467 million, higher than about $331 million in the year-ago quarter and $461.6 million in the last reported quarter. Higher rig utilization in the sector is expected to back the results. The Zacks Consensus Estimate of rig utilization in this sector is 59%, up from 42% in the year-ago period and 57% in fiscal first-quarter 2018.

The Zacks Consensus Estimate for operating income of U.S. Land segment is $27.51 million, up from the last quarter's $24.75 million income and the year-ago quarter's operating loss of $51.85 million.

The company also has a solid balance sheet with impressive leverage and liquidity ratios, giving Helmerich & Payne enough financial flexibility to take advantage of the recovering energy landscape.

Helmerich & Payne is  upgrading its fleet to increase efficiency, which can increase its market share in return. The company has increased its capital expenditure recently by 25%, which will enable it to reach its target of upgrading the rigs.

Earnings Whispers

Our proven model shows that Helmerich & Payne is likely to beat earnings estimates because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +16.93%. This is a very meaningful and leading indicator of a likely positive earnings surprise for shares. You can uncover the best stocks to buy or sell before they're reported with our  Earnings ESP Filter .

Zacks Rank: Helmerich & Payne carries a Zacks Rank #3 (Hold), which when combined with +16.93% ESP makes us confident about an earnings beat.

Note that stocks with a Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement. You can see  the complete list of today's Zacks #1 Rank stocks here

Other Energy Stocks With Favorable Combination

Here are some other companies from the same sector, which according to our model have the right combination of elements to post an earnings beat this quarter.

Frisco, TX-based Comstock Resources, Inc. CRK has a Zacks Rank #2, with an Earnings ESP of +37.34%. The company will report earnings on May 14.

Houston, TX-based Oil States International, Inc. OIS has a Zacks Rank #2 and an Earnings ESP of +32.83%. The company will report earnings on Apr 25.

Denver, CO-based Antero Resources Corporation AR has a Zacks Rank #3, with an Earnings ESP of +7.28%. The company will report earnings on Apr 25.

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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 Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: OIS , HP , CRK , AR

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