Key Factors to Impact Helmerich & Payne's (HP) Q3 Earnings

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Helmerich & Payne, Inc. HP is slated to report fiscal third-quarter 2018 results on Jul 26 before the opening bell. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 3 cents on revenues of $613 million.

In the preceding three-month period, the company reported net operating loss per share (excluding special items) of 5 cents, in line with the Zacks Consensus Estimate. Helmerich & Payne has an impressive earnings surprise history, beating estimates in three out of the trailing four quarters, recording an average positive earnings surprise of 12.93%

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 take a look at the estimate revision trend to get a clear picture of what analysts expect from the company prior to earnings release. The Zacks Consensus Estimate of a profit of 3 cents for the quarter under review has been revised downward by a penny over the last two months. This reflects a massive turnaround from a loss of 18 cents incurred in the corresponding quarter of the previous year.

Further, the Zacks Consensus Estimate for third-quarter revenues is pegged at $613 million, much higher than $499 million generated in the year-ago quarter.

Factors at Play

Helmerich & Payne's industry-leading drilling fleet, including advanced FlexRig, along with term contracts with well-capitalized oil majors bode well. On a further encouraging note, the company is poised to benefit from recovering commodity prices and higher drilling activities in North America.

The Zacks Consensus Estimate for operating revenues of Helmerich & Payne's largest segment - U.S. Land - is pegged at $518 million, higher than about $405.6 million recorded in the year-ago quarter and $483 million in the last reported quarter. Higher rig utilization in the sector is expected to back its results. The segment's rig utilization is expected at 63%, up from 52% in the year-ago period and 59% in fiscal second-quarter 2018. The Zacks Consensus Estimate for operating income of U.S. Land segment is pegged at $40.16 million, reflecting a turnaround from the year-ago quarter's operating loss of $8 million income.

The Zacks Consensus Estimate for the to-be-reported quarter's revenues from Helmerich & Payne's other two segments - Offshore and International Land drilling - is also pegged at higher levels compared with the prior-year quarter. Third-quarter revenues for International Land and Offshore segments are estimated at $58 million and $36.73 million, respectively, compared with $55.1 million and $33.7 million generated in the year-ago period.

However, declining margins in the International Land and Offshore units remain a concern and are likely to offset the optimism surrounding the stock. For the quarter to be reported, the Zacks Consensus Estimate for average rig margin at the International Land unit is pegged at $8,680 compared with $13,063 in the prior-year quarter. Further, average rig margin for the offshore segment is expected to decline to $10,360 compared with $11,503 in the year-ago quarter. The declining margins are likely to dent net earnings of the company.

Overall, tepid margins from the Offshore and International Land drilling segments are likely to counter solid results from its U.S. Land unit.

Earnings Whispers

Our proven model does not show that Helmerich & Payne is likely to beat earnings estimates in the quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -55.56%. This is because the Most Accurate Estimate stands at one cent while the Zacks Consensus Estimate is pegged at 3 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Helmerich & Payne currently has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company's negative ESP makes surprise prediction difficult. Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Energy Stocks With Favorable Combination

Though earnings beat looks uncertain for Helmerich & Payne, here are some companies from the same industry , which according to our model have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Noble Corporation NE has an Earnings ESP of +0.61% and a Zacks Rank #3. The company is expected to report second-quarter earnings on Aug 2. You can see the complete list of today's Zacks #1 Rank stocks here.

Transocean Limited RIG has an Earnings ESP of +18.16% and a Zacks Rank #3. The company is expected to announce second-quarter numbers on Jul 30.

Nabors Industries Limited NBR has an Earnings ESP of +6.79% and a Zacks Rank #3. The company is expected to post second-quarter earnings on Aug 1.

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Noble Corporation (NE): Free Stock Analysis Report

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Helmerich & Payne, Inc. (HP): Free Stock Analysis Report

Nabors Industries Ltd. (NBR): 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: NE , RIG , HP , NBR

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