Leading oilfield services company Weatherford International Ltd.WFT is expected to report fourth-quarter 2016 earnings on Feb 2.
The company has a mixed earnings history. Weatherford beat the Zacks Consensus Estimate in two and missed the same in the other two of the trailing four quarters. In the last reported quarter, the company delivered a negative earnings surprise of 8.95%.
Factors at Play
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. After the historic deal, crude price 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 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. Definitely, increase in E&P activities will result in more contracts for oilfield services players like Weatherford for efficiently setting up oil wells.
Despite those positives, shares of Weatherford underperformed the Zacks categorized Oil Field Mechanical & Equipment industry in the last three months. During the aforesaid period, shares of the company gained 9.1% compared with 19.1% improvement for the broader industry. Also, the Zacks Consensus Estimate for fourth quarter being revised from a loss of 31 cents to a loss of 32 cents.
Our proven model does not conclusively show that Weatherford is likely to beat on earnings 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) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Earnings ESP, stands at -3.13%, for the Most Accurate estimate stands at a loss of 33 cents and the Zacks Consensus Estimate is pegged narrower at a loss of 32 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Weatherford carries a Zacks Rank #3, which increases the predictive power. However, the company's negative Earnings ESP makes surprise prediction inconclusive.
We caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Weatherford International PLC Price and EPS Surprise
Stocks to Consider
Here are some companies from the same space, which according to our model, 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 .
Summit Midstream Partners, L.P. SMLP has an Earnings ESP of +76.47% 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.