Hess (HES) Gears Up for Q3 Earnings: What's in the Cards?

HessCorporation HES is set to report third-quarter 2020 results on Oct 28.

In the last reported quarter, the leading global independent energy company beat the Zacks Consensus Estimate, largely backed by higher oil equivalent production from the Bakken play and increased throughput volumes. Moreover, the company beat the consensus estimate in two of the prior four quarters, the average positive earnings surprise being 2.9%. This is depicted in the graph below:

Hess Corporation Price and EPS Surprise

Hess Corporation Price and EPS Surprise

Hess Corporation price-eps-surprise | Hess Corporation Quote

Let’s see how things have shaped up prior to this announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter loss per share of 71 cents has witnessed four downward revisions in the past 30 days. The estimated figure suggests a decline of 121.9% from the prior-year reported number.

The consensus estimate for third-quarter revenues of $1.2 billion indicates a 24% decline from the year-ago reported figure.

Factors to Consider

Although the price of crude oil in the September quarter recovered sequentially, thanks to easing of social-distancing measures, the commodity’s price was below the year-ago quarter level. Notably, the consensus estimate for the company’s average selling price of crude oil (including hedging) in the United States (where the firm’s operations spread across the prolific Bakken and deepwater Gulf of Mexico) is pinned at $46.62 per barrel, suggesting a drop from the year-ago quarter’s $54.72.

Drastic fall in fuel demand is also likely to have hurt the pricing scenario of natural gas. Particularly, the consensus estimate for the company’s worldwide average selling price of natural gas (including hedging) is pinned at $2.56 per Mcf, suggesting a drop from the year-ago quarter’s $3.81.

However, strong footprint in a key U.S. shale play, the North Dakota Bakken, is likely to have driven Hess’ total production volumes. Notably, the consensus estimate for the upstream firm’s total net hydrocarbon production is pinned at 323 thousand barrels of oil equivalents per day (MBoe/d), suggesting an increase from the year-ago quarter’s 312 MBoe/d.

Overall, while lower oil price is likely to have hurt the oil and gas explorer’s bottom line, higher production volumes are expected to have offset the negative.

Earnings Whispers

Our proven model does not indicate an earnings beat for Hess this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is -0.14%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hess currently carries a Zacks Rank #3.

Stocks to Consider

While an earnings beat looks uncertain for Hess, here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Antero Midstream Corporation AM has an Earnings ESP of +9.89% and is a Zacks #2 Ranked player. The company is scheduled to release third-quarter results on Oct 28. You can see the complete list of today’s Zacks #1 Rank stocks here

EOG Resources, Inc. EOG has an Earnings ESP of +48.62% and a Zacks Rank of 3. It is scheduled to report third-quarter results on Nov 5.

Oceaneering International, Inc.OII has an Earnings ESP of +33.91% and a Zacks Rank #3. The firm is scheduled to release third-quarter earnings on Oct 28.

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