Denver, CO-based independent energy company QEP Resources Inc. ( QEP ) is set to release its third-quarter 2014 results after the closing bell on Wednesday, Nov 5.
In the preceding three-month period, QEP Resources delivered a positive 22.58% earnings surprise - the second successive quarterly outperformance - buoyed by higher natural gas equivalent price and production.
Factors to Consider This Quarter
QEP Resources' high natural gas exposure raises its sensitivity to gas price fluctuations, compared to its independent peers with a better balanced oil/gas production profile. The company, which derives bulk of its reserves/production from natural gas, has seen its sales and income fluctuate in recent quarters on the back of sharp volatility in gas prices. We expect more of the same for the to-be-reported quarter.
With liquids contributing around 42% of QEP Resources' total production, the crude price tumble over the last three months is expected to further drag down results for the company.
Our proven model does not conclusively show that QEP Resources - which split from Questar Corp. ( STR ) in 2010 - is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Negative Zacks ESP: This is because the Most Accurate estimate stands at 26 cents, while the Zacks Consensus is higher at 28 cents. This results in an ESP of -7.14%.
Zacks Rank #3 (Hold): QEP Resources carries a Zacks Rank #3, which when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
While earnings beat looks uncertain for QEP Resources, here are two energy firms you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:
Murphy USA Inc. ( MUSA ) has an Earnings ESP of +20.51% and holds a Zacks Rank #1 (Strong Buy).
Energy Transfer Equity L.P. ( ETE ) has an Earnings ESP of +50.00% and holds a Zacks Rank #3.
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