Technology

4 Oil & Gas Earnings to Watch on Jul 29: FTI, CXO, APA & HES

We are entering the heart of the Q2 earnings season for Oil/Energy, with a host of companies – including the likes of ExxonMobil XOM and Chevron CVX – expected to come out with results by the end of this week. Before going into the details of the upcoming releases, let’s take a look at the factors affecting quarterly results and the report card so far.

Commodity Prices Plunge as Coronavirus Bites

Investors should know that there is a high correlation between commodity price and the earnings of energy companies.

So, how does the price of oil and gas compare with the year-ago period?

Collapsing commodity prices and demand are likely to have played foul on the sector’s top and bottom line with negative growth expected on both fronts. While things started getting bad toward the end of the first quarter, the full impact of the coronavirus pandemic and the oil price slump may only have been felt in the April-June period when crude even plunged into negative territory briefly.

According to the U.S. Energy Information Administration, in April, May and June of 2019, the average monthly WTI crude price was $63.86, $60.83 and $54.66 per barrel, respectively. This year, average prices were much lower - $16.55 in April, $28.56 in May and $38.31 in June.

The news is not rosy on the natural gas front either. Last year, U.S. Henry Hub average natural gas prices were $2.65 per MMBtu in April, then fell to $2.64 in May and $2.40 in June. Coming to 2020, the fuel was trading at $1.74, $1.75 and $1.63 per MMBtu, in April, May and June, respectively.

Oil & Gas Companies to Have Suffered

Taking into account the sharp drop in commodity price, the picture looks rather downbeat for the Q2 earnings season.

Per the latest Earnings Trends, energy is likely to have experienced big top and bottom line decline from a year earlier. Per our expectations, the sector’s earnings are likely to have slumped 149.4% from second-quarter 2019 on 42% lower revenues.

For the few S&P 500 companies that have already reported, total earnings are down 96.3% from the same period last year on 25.3% lower revenues, with 50% positive earnings surprises but none beating revenue estimates.

Key Releases

Given the bleak year-over-year backdrop, let’s take a glance at how four energy players are placed ahead of their second-quarter results slated for release on Jul 29.

Our proprietary model clearly indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

TechnipFMC plc FTI: This manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry, is slated to report quarterly results after the closing bell. The company came up with weaker-than-expected earnings in the last reported quarter, hurt by the coronavirus-induced vulnerable market scenario and lower-than-anticipated profits from the Technip Energies (previously Onshore/Offshore) segment. As far as earnings surprises are concerned, the firm displays a dismal record. It missed the Zacks Consensus Estimate in three of the last four quarters and beat in the other, delivering negative surprise of 76.78%, on average. This is depicted in the graph below:
 

TechnipFMC plc Price and EPS Surprise

TechnipFMC plc Price and EPS Surprise

TechnipFMC plc price-eps-surprise | TechnipFMC plc Quote

The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 6 cents per share on revenues of $3.1 billion. This indicates year-over-year earnings and revenue decline of 84.6% and 10.7%, respectively.

Our proven model does not conclusively predict an earnings beat for TechnipFMC this time around, as it has an Earnings ESP of +8.26% and a Zacks Rank #4.

Concho Resources Inc. CXO: The company, whose core operations are focused on the prolific Permian Basin, is slated to report quarterly results after the closing bell. The company came up with in-line earnings in the last reported quarter as better-than-anticipated production volumes were offset by lower commodity prices. As far as earnings surprises are concerned, Concho Resources surpassed the Zacks Consensus Estimate on one occasion, missed in two and reported in line in another quarter, the average surprise being 4.86%. This is depicted in the graph below:
 

Concho Resources Inc. Price and EPS Surprise

Concho Resources Inc. Price and EPS Surprise

Concho Resources Inc. price-eps-surprise | Concho Resources Inc. Quote

The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 39 cents per share on revenues of $847.8 million. This indicates a year-over-year earnings and revenue decline of 43.5% and 24.8%, respectively.

Our proven model does not conclusively predict an earnings beat for Concho Resources this time around, as it has an Earnings ESP of 0.00% and a Zacks Rank #3.

Apache Corporation APA: Apache, with oil and gas operations in the United States, Egypt and in the North Sea of the United Kingdom, is also set to report quarterly results after the closing bell. In the last reported quarter, the Houston, TX-based company beat the consensus mark on improved Permian production. Regarding earnings surprises, the upstream operator is on a solid footing, having missed in one of the last four quarters and gone past the Zacks Consensus Estimate in the other three, the average beat being 131.07%. This is depicted in the graph below:
 

Apache Corporation Price and EPS Surprise

Apache Corporation Price and EPS Surprise

Apache Corporation price-eps-surprise | Apache Corporation Quote

The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 97 cents per share on revenues of $701 million. This indicates a year-over-year earnings and revenue decline of 981.8% and 56.3%, respectively.

Our proven model does not conclusively predict an earnings beat for Apache this time around, as it has an Earnings ESP of -8.84% and a Zacks Rank #2. (Factors Influencing Apache's Fate in Q2 Earnings)

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hess Corporation HES: Hess, which has made some world-class oil discoveries at the Stabroek Block off the coast of Guyana, is set to unveil quarterly results before the opening bell. In the last reported quarter, the independent oil and gas producer beat the consensus mark on strong production volumes. As far as earnings surprises are concerned, Hess surpassed the Zacks Consensus Estimate on two occasions, missed in one and reported in line in another quarter, the average positive surprise being 2.64%. This is depicted in the graph below:
 

Hess Corporation Price and EPS Surprise

Hess Corporation Price and EPS Surprise

Hess Corporation price-eps-surprise | Hess Corporation Quote

The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of $1.10 per share on revenues of $1 billion. This indicates year-over-year earnings and revenue decline of 1,122.2% and 39.7%, respectively.

Our proven model predicts an earnings beat for Hess this time around, as it has an Earnings ESP of +3.20% and a Zacks Rank #2. (Is a Beat in Store for Hess This Earnings Season?)

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Exxon Mobil Corporation (XOM): Free Stock Analysis Report

Apache Corporation (APA): Free Stock Analysis Report

TechnipFMC plc (FTI): Free Stock Analysis Report

Chevron Corporation (CVX): Free Stock Analysis Report

Hess Corporation (HES): Free Stock Analysis Report

Concho Resources Inc. (CXO): Free Stock Analysis Report

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