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Cimarex Energy (XEC): Is a Beat in Store in Q4 Earnings?

Independent oil & gas exploration and production (E&P) firm Cimarex Energy CompanyXEC is scheduled to release fourth-quarter 2016 results after the closing bell on Wednesday, Feb 15.

Last quarter, the company delivered a positive average surprise of 10.81%. Moreover, the company outpaced the Zacks Consensus Estimate in two of the past four quarters, with an average positive earnings surprise of 149.21%.

Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Cimarex Energy is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.72%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Cimarex Energy carries a Zacks Rank #2 (Buy) which, when combined with a positive Earnings ESP, makes us confident about an earnings beat.

Note that stocks with Zacks Ranks #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating on earnings. The Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

What is Driving the Better-Than-Expected Earnings?

Although oil prices remained low in the first two months of the fourth quarter, the commodity advanced after OPEC decided to cut production. On Nov 30, the cartel reached a historic accord to curb output in keeping with the need to recover from the weak pricing scenario. Notably, this is the first time since 2008 that OPEC signed a deal to cut oil production.

Thereafter, non-OPEC players also jumped on the bandwagon to limit crude output. After the historic deal, crude prices improved and even crossed the psychological $50 per barrel mark. In fact, throughout December the commodity was sold above the benchmark.

Overall, we can say that the last month of fourth quarter was surely favorable oil E&P companies. These firms continued to gather on the oil patches as evidenced by from the improved rig count data issued by Baker Hughes Inc. BHI .

On top of that, the Zacks Consensus Estimate for Cimarex's fourth quarter has been revised upward over the last 30 days, although the company failed to outperform the Zacks categorized Oil & Gas-U.S Exploration & Production industry in the last three months. During the aforesaid period the company gained 4.1% as against 4.8% improvement for the broader industry.

Other Stocks to Consider

Southwestern Energy Company SWN , which is expected to release earnings results on Feb 23, has an Earnings ESP of +8.33% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

EOG Resources, Inc. EOG has an Earnings ESP of +6.67% and a Zacks Rank #3. The company is expected to release earnings results on Feb 27.

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Southwestern Energy Company (SWN): Free Stock Analysis Report

Baker Hughes Incorporated (BHI): Free Stock Analysis Report

EOG Resources, Inc. (EOG): Free Stock Analysis Report

Cimarex Energy Co (XEC): 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.


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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