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Output Growth and Cost Cut to Aid Cabot's (COG) Q2 Earnings

Cabot Oil & Gas CorporationCOG is set to report second-quarter 2018 results on Jul 27 before the opening bell. The Zacks Consensus Estimate for the quarter under review is pegged at a profit of 18 cents per share on revenues of $375 million. The earnings estimate compares favorably with the year-ago quarter's profit of 14 cents.

Headquartered in Texas, Cabot is an independent oil and gas exploration company with producing properties mainly in continental United States. In the last reported quarter, the company delivered a positive earnings surprise of 7.69% on production gains and reduced costs. We expect this trend to continue in the to-be-reported quarter as well. Coming to earnings surprise history, Cabot displays a mixed performance, surpassing estimates in two out of the trailing four quarters.

Cabot Oil & Gas Corporation Price and EPS Surprise

Cabot Oil & Gas Corporation Price and EPS Surprise | Cabot Oil & Gas Corporation Quote

Let's see how things are shaping up prior to the announcement.

Why a Likely Positive Surprise?

Our proven model shows that Cabot is likely to beat earnings estimates in the to-be-reported quarter as 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) to be able to beat estimates. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +3.84%. This is because the Most Accurate Estimate of 19 cents is pegged higher than the Zacks Consensus Estimate of 18 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Currently, Cabot holds a Zacks Rank #3, which when combined with a positive ESP, makes us confident of an earnings beat.

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.

What's Driving the Better-Than-Expected Performance?

Cabot's best-in-class positioning in the Marcellus Basin has made it well positioned for production and reserves growth. As of now, the company has around 200,000 net acres in the prime Marcellus acreage, with an estimated 3,000 still remaining undrilled. During the quarter under review, the company brought 20 wells into production. We expect the natural gas-weighted company to beat second-quarter earnings expectation on higher volumes. Precisely, the Zacks Consensus Estimate for total gas production for the to-be-reported quarter is pegged at 172 billion cubic feet (Bcf), higher than the year-ago quarter's 166 Bcf.

Along with production gains, Cabot's impressive cost-containment strategies are also likely to boost the company's prospects. Driven by operational efficiencies, Cabot was able to reduce its year-over-year unit operating production costs by 22.1% in the last reported quarter, which is an impressive achievement amid the low gas price scenario. The trend is likely to continue in the to-be-reported quarter as well, and buoy Cabot's earnings and cash flow.

Other Stocks to Consider

Cabot is not the only energy firm looking up this earnings season. Here are some other companies from the same space, which according to our model also have the right combination of elements to post an earnings beat in the quarter to be reported.

Anadarko Petroleum CorporationAPC has an Earnings ESP of +5.26% and a Zacks Rank #2. The energy explorer is anticipated to release second-quarter earnings on Jul 31.

California Resources CorporationCRC has an Earnings ESP of +54.72% and a Zacks Rank #2. The energy explorer is anticipated to report second-quarter earnings on Aug 02.

Canadian Natural Resources LimitedCNQ has an Earnings ESP of +1.42% and sports a Zacks Rank #1. The energy explorer is anticipated to announce second-quarter earnings on Aug 02. You can see the complete list of today's Zacks #1 Rank stocks here.

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Canadian Natural Resources Limited (CNQ): Free Stock Analysis Report

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California Resources Corporation (CRC): 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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