Is a Beat in Store for Hess (HES) This Earnings Season?

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Hess Corporation HES is expected to report first-quarter 2018 earnings on Apr 25.

In the last reported quarter, the upstream energy company posted a negative earnings surprise of 12.2%. Moreover, Hess delivered an average negative earnings surprise of 0.8% for the last four quarters. Let's see how things are shaping up prior to the announcement.

Which Way Are Estimates Treading?

Let's look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company before the earnings release.

The Zacks Consensus Estimate of a loss of 55 cents for the first quarter has seen two upward revisions and one downward revision by firms in the last 60 days. It reflects an improvement of about 48.6% from the year-ago quarter.

Further, analysts polled by Zacks expect revenues of $1,178 million for the first quarter, down 10.1% from the year-ago quarter.

Factors to Consider

Hess is among the leading producers of crude in the Bakken oil shale play in North Dakota. The company has interests in the best areas of the play. With healthy Q1 crude pricing scenario following OPEC's extension of production cut deal through 2018-end, we believe that the Bakken play should contribute to the company's production growth.  

Analysts polled by Zacks expect average worldwide realized oil price to rise to $60 per barrel, from $57 in fourth-quarter 2017 and $48.61 a year ago. The rally in oil prices will benefit upstream players like Hess.

Also, the company's long-term debt fell 4.4% last year while cash balances jumped 77.4%, reflecting balance sheet strength. On top of that, free cashflow turned positive in 2017, against negative free cashflow recorded in 2016.

Price Performance in Q1

During the quarter, Hess has outperformed the  industry . The stock has gained 6.6% against the industry's decline of 1.4%.

Earnings Whispers

Our proven model shows that Hess is likely to beat on earnings this time because it has the right combination of two key ingredients.  

Zacks ESP Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +6.36%. This is because the Most Accurate estimate of a loss of 52 cents is narrower than the Zacks Consensus Estimate of a loss of 55 cents. You can uncover the best stocks to buy or sell before they're reported with our  Earnings ESP Filter .

Zacks Rank : Hess carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings. The combination of Hess' favorable Zacks Rank and Earnings ESP makes us confident about an earnings beat.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Other Stocks to Consider

Here are a few other firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter.

Comstock Resources, Inc. CRK is an oil and gas explorer. The company has an Earnings ESP of +37.34% and carries a Zacks Rank #2. You can see  the complete list of today's Zacks #1 Rank stocks here .

Oil States International, Inc. OIS is a leading oilfield services player. The company has an Earnings ESP of + 32.14% and carries a Zacks Rank #2.

Pioneer Natural Resources Company PXD is an upstream energy company. The company has an Earnings ESP of +3.33% and carries a Zacks Rank #3.

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Hess Corporation (HES): 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 Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: OIS , PXD , CRK , HES

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