Domestic energy explorer Apache Corp.APA is set to release its fourth-quarter 2016 results before the opening bell on Thursday, Feb 23.
In the preceding three-month period, the Houston, TX-based company reported narrower-than-expected loss owing to cost savings.
Coming to earnings surprise history, Apache has a good record: it surpassed estimates in three of the last four quarters.
Apache Corporation Price and EPS Surprise
Let's see how things are shaping up for this announcement.
Factors to Consider This Quarter
The OPEC deal and extreme weather conditions engineered a hefty rise in oil and gas prices during the fourth quarter.
A historic OPEC production cut agreement, together with help from non-OPEC producers saw oil prices end the year at $53.72 a barrel - representing a gain of 11.4% sequentially and 45% for the year.
Meanwhile, natural gas embarked on its own upward journey, with futures jumping around 25% just in the fourth quarter. Ending the year at $3.724 per million Btu (MMBtu) - up 59% from 2015 - the heating fuel was buoyed by a cold snap that translated into strong demand.
All this bodes well for Apache.
Apache's successful cost reduction initiatives are expected to further cushion the results. To its credit, the company has been able to achieve a substantive decline in the operating cost structure.
However, a weak production profile continues to haunt the oil and gas finder. Last quarter, Apache's production of oil and natural gas (excluding divested assets and non-controlling interests) averaged 438,020 oil-equivalent barrels per day (BOE/d) (64% liquids), down 10% from the third quarter of 2015. A similar performance will hamper the company's fourth quarter numbers.
Our proven model does not conclusively show that Apache will beat estimates this quarter. That is because 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 .
That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -33.33%. This is because the Most Accurate estimate stands at 6 cents, while the Zacks Consensus Estimate is pegged higher, at 9 cents.
Zacks Rank: Apache has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for Apache, here are some energy firms you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
McDermott International Inc. MDR has an Earnings ESP of +100.00% and a Zacks Rank #1. The company is expected to release earnings results on Feb 21. You can see the complete list of today's Zacks #1 Rank stocks here .
TechnipFMC plc FTI has an Earnings ESP of +20.00% and a Zacks Rank #1. The company is anticipated to release earnings on Feb 21.
Kosmos Energy Ltd. KOS has an Earnings ESP of +133.33% and a Zacks Rank #2. The company is likely to release earnings on Feb 27.
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