Can Canadian Natural (CNQ) Q3 Earnings Pull a Surprise?
Independent exploration and production (E&P) company, Canadian Natural Resources LimitedCNQ is set to report third-quarter 2015 results on Nov 5, before the opening bell.
Last quarter, Canadian Natural posted a positive earnings surprise of 258.33%. Let's see how things are shaping up for this announcement.
Factors to Consider this Quarter
Most of the company's production comprises oil. Hence we can say that crude price is the main influence on the business of this E&P player.
During the entire third quarter of 2015, we saw weakness in crude price. This was primarily due to an oversupply of the commodity.
Since, there is a positive correlation between oil price and the company's earnings, the oil price weakness might hurt Canadian Natural.
A ray of hope in such a situation is that the upstream player has hedges a part of its production for this year at favorable prices. On top of that, Canadian Natural anticipates third-quarter liquid production at 559,000-590,000 barrels per day (Bbl/d), higher than 509,047 Bbl/d in the prior quarter. It will be interesting to see if these can drive up an earnings beat at Canadian Natural.
Our proven model does not conclusively show that Canadian Natural is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 10 cents.
Zacks Rank: Canadian Natural carries a Zacks Rank #3 (Hold) increases the chance of a beat. Then again, we must also have a positive ESP for a positive surprise prediction.
We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some players for investors to consider, that, according to our model have the right combination of elements to post an earnings beat this quarter:
Breitburn Energy Partners LP BBEP has an Earnings ESP of + 200.00% and a Zacks Rank #2 (Buy). The partner is likely to release earnings results on Nov 5.
Atlas Resource Partners, L.P. ARP has an Earnings ESP of + 144.44% and a Zacks Rank #3. The partnership is expected to release earnings results on Nov 9.
Seadrill Partners LLC SDLP with an Earnings ESP of +12.00% and a Zacks Rank #1 (Strong Buy). The partner is anticipated to release earnings results on Nov 25.