Is a Beat in Store for Hess (HES) this Earnings Season?

Upstream energy player, Hess CorporationHES is expected to report third-quarter 2017 earnings on Oct 25.

Last quarter, the company delivered a negativeearnings surprise of 10.61%. However, Hess delivered an average positive earnings surprise of 2.60% for the last four quarters. Let's see how things are shaping up prior to the announcement.

Hess Corporation Price and EPS Surprise

Hess Corporation Price and EPS Surprise | Hess Corporation Quote

Which Way are Estimates Treading?

Let's look at the estimate revisions in order to get a clear picture of what analysts are thinking about the company before earnings release.

The Zacks Consensus Estimate of a loss of $1.29 for the third quarter has seen five upward revisions and two downward revisions by firms in the last thirty days. It reflects a year-over-year decline of about 15.2% from the year-ago quarter.

Further, analysts polled by Zacks expect revenues of $1,284 million for the impending quarter, up7.4% from the year-ago quarter.

Factors to Consider

Hess is among the leading producers of crude in the Bakken oil shale play in North Dakota. The company has interests in the best areas of the play. With crude prices improving after OPEC decided to curb output, we believe that Bakken play should contribute to the company's production growth in the long run. Moreover, new output from Gulf of Mexico and Malaysia could add considerably to the company's output. These are likely to be reflected in this quarter's results.

Analysts polled by Zacks expect average realized oil price to rise 1% from the preceding quarter to $48.86 per barrel. The positivity in the oil prices will benefit upstream players like Hess.

However, since the beginning of 2014, long-term debt load has been on the rise. Our proprietary model shows that from 2014 to 2016, the company's long-term debt increased from nearly $5,500 million to almost $6,700 million.

Also, net cash flow from operations has been declining steadily over the last three years, reflecting weak operations owing to persisting low commodity prices.

Price Performance in Q3

During the quarter, Hess has underperformed the industry . The stock has gained 6.9% compared with the industry's growth of 9.1%.

Earnings Whispers

Our proven model shows that Hess is likely to beat on earnings this time because it has the right combination of two key ingredients.

Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.52%. This is because the Most Accurate estimate of a loss of $1.27 comes below the Zacks Consensus Estimate of a loss of $1.29. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Hess carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings. The combination of Hess' favorable Zacks Rank and Earnings ESP makes us confident about an earnings beat.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here are other firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter.

Noble Midstream Partners LP NBLX , headquartered in Houston, TX, has diversified energy infrastructure properties.The company has an Earnings ESP of +1.91% and flaunts a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here

Tesoro Corporation ANDV , based in San Antonio, TX, operates as the refiner and marketer of petroleum products. The company has an Earnings ESP of +5.02% and carries a Zacks Rank #3.

Gulfport Energy Corporation GPOR , headquartered in Oklahoma City, OK, owns and operates mature oil and gas properties in the Louisiana Gulf Coast area. The company has an Earnings ESP of +0.97% and carries a Zacks Rank #3.

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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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