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EXCO Resources (XCO): What Awaits this Earnings Season?

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Independent oil and natural gas company EXCO Resources Inc.XCO is set to release third-quarter 2015 financial results after the close of the trading session on Oct 27.

Last quarter, the company delivered a positive earnings surprise of 37.5%, which marked its second consecutive quarterly beat. However, in the last four quarters, the company's average earnings surprise was negative 12.5%.

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

Factors to Consider

EXCO Resources is involved in exploration, production and development of oil and gas. As such, its business is positively correlated to oil and natural gas prices . During the third quarter, natural gas traded at around $2.5 million Btu, substantially below the prior-year quarter average of about $3.7 million Btu. Oil prices also remained below $50 per barrel.

With low commodity prices both revenues and earnings of EXCO Resources are likely to be weak. The company's high debt level is another concern.

Moreover, the third quarter and full-year earnings estimates for the company declined over the past few weeks. This suggests further bearishness ahead.

Earnings Whispers

Our proven model does not conclusively show that EXCO Resources is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -42.86%. The Most Accurate estimate for EXCO Resources stands at a loss of 10 cents, while the Zacks Consensus Estimate is pegged at a loss of 7 cents.

Zacks Rank: EXCO Resources 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 Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Exterran Partners LP EXLP has Earnings ESP of +19.23% and a Zacks Rank #1. The company is expected to release earnings on Nov 3.

Natural Gas Services Group Inc. NGS has Earnings ESP of +21.05% and a Zacks Rank #1. The company is anticipated to release earnings on Nov 5.

Swift Energy Co. SFY has Earnings ESP of +11.11% and a Zacks Rank #2. The company is likely to release earnings on Nov 5.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SWIFT ENERGY CO (SFY): Free Stock Analysis Report

EXTERRAN PTNRS (EXLP): Free Stock Analysis Report

EXCO RESOURCES (XCO): Free Stock Analysis Report

NATURAL GAS SVC (NGS): 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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