Range Resources (RRC) Q4 Earnings: What's in the Cards?

Upstream energy firm Range Resources CorporationRRC is set to report fourth-quarter 2016 results on Feb 22, after the closing bell.

Last quarter, Range Resources delivered a positive earnings surprise of 14.81%. However, we note that the company posted an average negative earnings surprise of 2,423.06% in the last four quarters. Let's see how things are shaping up for this announcement.

Factors to Consider this Quarter

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 announced their decision to reduce crude output. Following the historic deal, crude price started to improve and even crossed the psychological $50 per barrel mark. In fact, throughout December the commodity was sold above the benchmark.

Moreover, natural gas pricing environment was favorable during the October-December quarter of 2016 on a year-over-year basis.

Overall, the last month of the fourth quarter was beneficial 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 are gathering to the oil patches.

Moreover, Range Resources projected fourth-quarter 2016 output to be almost 1,850 million cubic feet equivalent (MMcfe) per day, which is much higher than 1,434.8 MMcfe per day. Increased output in an improved commodity pricing environment could favor the company's earnings as oil and gas are likely to be sold at higher prices.

Despite these positives, Range Resources shares underperformed the Zacks categorized Oil & Gas-U.S Exploration & Production industry during fourth quarter. Over the aforesaid period, shares of the company lost 12.1% compared with increase of 0.6% for the broader industry.

Earnings Whispers

Our proven model does not conclusively show that Range Resources will beat estimates this quarter. That is because 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. 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 -12.50%. This is because the Most Accurate estimate stands at 7 cents, while the Zacks Consensus Estimate is pegged higher at 8 cents.

Zacks Rank. Range Resources carries a Zacks Rank #2. Though a favorable Zacks Rank increases the predictive power of ESP, the company's negative ESP of -12.50% makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some firms that have the right combination of elements to post an earnings beat this quarter:

Kosmos Energy Ltd. KOS has an Earnings ESP of +133.33% and Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

QEP Resources, Inc. QEP has an Earnings ESP of +4.55% 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.

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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