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Why an Earnings Beat Is Likely for Transocean (RIG) in Q2


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We expect Transocean Ltd. RIG to beat expectations when it reports second-quarter 2018 results on Monday, Jul 30, after the market closes . The current Zacks Consensus Estimate for the quarter under review is a loss of 17 cents on revenues of $755.2 million.

In the preceding three-month period, the offshore drilling powerhouse reported wider-than-expected loss as increased operational costs due to the acquisition of Songa Offshore adversely impacted the results .

As far as earnings surprises are concerned, the Switzerland-based rig supplier is on a solid footing, having gone past the Zacks Consensus Estimate thrice in the last four reports. This is depicted in the graph below:

Transocean Ltd. Price and EPS Surprise

Transocean Ltd. Price and EPS Surprise | Transocean Ltd. Quote

Investors are keeping their fingers crossed and hoping that Transocean surpasses earnings estimate this time too. Thankfully, our model indicates that the company might beat on earnings this time around too.

Let's delve deep to find out the factors likely to impact Encana's second-quarter results.

Why a Likely Positive Surprise?

Our proven model shows that Transocean is likely to beat earnings in the to-be-reported quarter as it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.57%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Transocean is #3 Ranked, which, when combined with a positive ESP, makes us confident of earnings beat. 

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What's Driving the Better-Than-Expected Earnings?

Higher and stable oil prices have led to improving contract visibility and dayrates. As a proof of the resurgence in activities, the Zacks Consensus Estimate for second-quarter contract drilling revenue is pegged at $716 million, higher than $664 million reported in the previous quarter and above the second-quarter 2017 sales of $705 million.

Transocean's industry-leading contract backlog of $12.5 billion and a revenue efficiency in excess of 95% are also expected to help results.

Other Stocks to Consider

Transocean is not the only energy firm looking up this earnings season. Here are some companies from the space which, according to our model, also have the right combination of elements to post earnings beat this quarter

ConocoPhillips COP has an Earnings ESP of +0.89% and a Zacks Rank #1. The firm is expected to release earnings on Jul 26. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Valero Energy Corp. VLO has an Earnings ESP of +1.32% and a Zacks Rank #3. The company is anticipated to release earnings on Jul 26.

Anadarko Petroleum Corp. APC has an Earnings ESP of +3.45% and a Zacks Rank #3. The company is anticipated to release earnings on Jul 31.

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Valero Energy Corporation (VLO): Free Stock Analysis Report

Transocean Ltd. (RIG): Free Stock Analysis Report

Anadarko Petroleum Corporation (APC): Free Stock Analysis Report

ConocoPhillips (COP): 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: VLO , RIG , APC , COP



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