Upstream energy player Newfield Exploration Co.NFX is set to release fourth-quarter 2016 financial results after the closing bell on Feb 21.
Last quarter, the company posted a negative earnings surprise of 4.00%. However, Newfield had an average positive earnings surprise of 754.83% for the last four months. Let's see how things are shaping up for this announcement.
Our proven model shows that Newfield is likely to beat earnings because it has the right combination of two key ingredients. 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.
Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +10.81%.This is a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Newfield currently has a Zacks Rank #3, which when combined with a positive Earnings ESP, makes us confident about an earnings beat.
However, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors Likely to Affect 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. Following the historic deal, crude prices improved and even crossed the psychological $50 per barrel mark. In fact, the commodity was sold above the benchmark throughout December.
Overall, the last month of fourth quarter was quite favorable for oil E&P companies. The improved rig count data issued by Baker Hughes Inc. BHI indicates that these firms continued to gather to the oil patches.
We also note that Newfield shares have outperformed the Zacks categorized Oil & Gas-U.S Exploration & Production industry in the last three months. During the aforesaid period, the company gained almost 8% as against 4.3% improvement for the broader industry. Moreover, the Zacks Consensus Estimate for the fourth quarter has been revised upward over the last 30 days.
Other Stocks to Consider
Newfield is not the only company looking up this earnings season. Here are some other companies from the same space that are also poised for an earnings beat.
Concho Resources Inc. CXO , which is anticipated to release earnings results on Feb 21, has an Earnings ESP of +55.56% 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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