Independent oil and gas exploration and production company, Pioneer Natural Resources CompanyPXD is expected to report fourth-quarter 2016 earnings after the closing bell around Feb 7.
Last quarter, the company posted a negative earnings surprise of 23.53%. We note that Pioneer Natural has outperformed the Zacks Consensus Estimate in three of the preceding four quarters with an average positive surprise of 19.18%.
Let's see how things are shaping up prior to the announcement.
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.
Soon after, non-OPEC players also jumped on the bandwagon to limit crude output. Following the historic deal, crude started moving north and even crossed the psychological $50 per barrel mark. In fact, throughout December the commodity was sold above the benchmark.
Overall, the last month of the fourth quarter was favorable for oil exploration and production (E&P) companies. The improved rig count data issued by Baker Hughes Inc. BHI clearly indicates that more and more of these firms continue to gather to the oil patches.
Amid the improved crude pricing scenario, the company's revised fourth-quarter production guidance raises optimism. During third-quarter 2016 results announcement, Pioneer Natural projected October to December quarter production to lie in the range of 237 MBOE/d and 242 MBOE/d which is higher than the fourth-quarter 2015 output of 214.7 MBOE/d.
Despite these positives, Pioneer Natural shares underperformed the Zacks categorized Oil & Gas-U.S Exploration & Production industry in the last three months. During the aforesaid period, shares of the company gained 5.5% compared with almost 9% increase for the broader industry.
Our proven model does not conclusively show that Pioneer Natural is likely to beat estimates this quarter as it does not have 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. That is not the case here as you will see below.
Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -3.33%. This is because the Most Accurate estimate stands at 29 cents while the Zacks Consensus Estimate is pegged higher at 30 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Pioneer Natural Resources currently has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company's Earnings ESP of -3.33% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some other companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:
Enable Midstream Partners LP ENBL has an Earnings ESP of +11.77% and Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .
Plains All American Pipeline LP PAA has an Earnings ESP of +26.53% and 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.