BP Q3 Earnings: Key Factors to Know Ahead of the Release

BP plcBP is expected to report third-quarter 2018 earnings on Oct 30, before the opening bell.

The British oil giant's earnings were in line with expectations in the preceding three-month period. However, the bottom line recorded a massive year-over-year improvement on the back of higher price realizations and project ramp ups. Coming to earnings surprise history, the company has missed earnings estimates in just one of the trailing four quarters. This is depicted in the graph below.

BP p.l.c. Price and EPS Surprise

BP p.l.c. Price and EPS Surprise | BP p.l.c. Quote

Importantly, the Zacks Consensus Estimate for BP's third-quarter earnings is pegged at 85 cents per share, which marks an increase of 50.8% from the year-ago figure. However, earnings estimates of 85 cents has moved south by a penny over the past 30 days.

Let's delve deeper to find out how things are shaping up for this announcement.

Factors at Play

Average West Texas Intermediate (WTI) crude prices were recorded at $70.98, $68.06 and $70.23 per barrel in the month of July, August and September 2018, respectively, per data from the U.S. Energy Information Administration (EIA). These prices were considerably higher than the year-ago respective prices of $46.63, $48.04 and $49.82. Notably, oil prices were fueled by concerns over U.S. sanctions on Iran, OPEC's efforts to tighten the market and strong global demand.

Natural gas prices also fared well, following improving clean energy demand. The average monthly spot prices of the commodity for the respective months of third-quarter 2018 were $2.83 per Million Btu, $2.96 per Million Btu and $3.00 per Million Btu, representing healthier prices than third-quarter 2017.

While the upstream segment of the company will surely benefit from higher commodity price realizations, it expects its production levels to remain almost unchanged from the last reported quarter and also from the year-ago level. Seasonal turnaround and maintenance activities are likely to limit its output levels.

In the downstream segment as well, the company expects high level of turnaround activities at its Whiting refinery in the United States. While turnaround activities may impact throughput levels, the improved refining margin environment may offset the adverse impacts to a considerable extent.

Earnings Whispers

Our proven model also does not conclusively show that BP will beat estimates in the to-be-reported 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 the consensus estimate. 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.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at 85 cents.

Zacks Rank: BP currently carries a Zacks Rank #2. Though a Zacks Rank #2 increases the predictive power of ESP, an ESP of 0.00% makes surprise prediction difficult.

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

Stock to Consider

Though an earnings beat looks uncertain for BP, here are a few firms from the energy space that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat in the quarter to be reported.

Anadarko Petroleum CorporationAPC has an Earnings ESP of +2.39% and a Zacks Rank #2. The firm is expected to release third-quarter earnings on Oct 30, after the closing bell. You can see the complete list of today's Zacks #1 Rank stocks here.

EOG Resources, Inc.EOG has an Earnings ESP of +1.41% and carries a Zacks Rank #2. The company is anticipated to release quarterly results on Nov 1.

NOW Inc.DNOW has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is anticipated to release quarterly numbers on Nov 1.

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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