Will ConocoPhillips (COP) Disappoint This Earnings Season?

ConocoPhillips COP is scheduled to report third-quarter 2019 results on Oct 29, before the opening bell.

The company missed earnings estimates once in the trailing four quarters, delivering average positive earnings surprise of 9.1%.

ConocoPhillips Price and EPS Surprise

ConocoPhillips Price and EPS Surprise

ConocoPhillips price-eps-surprise | ConocoPhillips Quote

Let’s see how things have shaped up for this announcement.

Which Way are Estimates Trending?

Let’s take a look at estimate revisions to get a clear picture of what analysts are thinking about the company before the earnings release.

The Zacks Consensus Estimate for third-quarter earnings per share of 78 cents has witnessed no upward movement but four downward revisions by firms in the past 30 days. This estimate is indicative of a 42.7% decline from the year-ago reported figure.

The Zacks Consensus Estimate for second-quarter revenues is pegged at $7.1 billion, suggesting a plunge of 30.6% from the year-ago reported figure.

Factors to Consider

Lower Commodity Prices

Being primarily involved in the exploration and production of oil and natural gas, ConocoPhillips’ earnings and revenues are directly related to commodity prices. Notably, the WTI crude price in third-quarter 2019 was lower than the year-ago period. In July, August and September, WTI averaged $57.35, $54.81 and $56.95 per barrel, respectively, per the U.S. Energy Information Administration. In comparison, WTI averaged $70.98, $68.06 and $70.23 per barrel, respectively, in the comparable three months of 2018. The year-over-year decline in crude price might have hurt the company’s upstream businesses, as ConocoPhillips has an oil-heavy portfolio.

Moreover, the Zacks Consensus Estimate for average natural gas sales prices is pegged at $5.52 per Mcf for third-quarter 2019, indicating a decline from the year-ago quarter’s $5.81.

Overall Production Rise

The Zacks Consensus Estimate for third-quarter natural gas production is pegged at 2,725 million cubic feet per day (MMcfd), suggesting a decrease from 2,732 MMcfd in the prior-year period. However, for the to-be-reported quarter, ConocoPhillips projects overall production in the range of 1,290-1,330 thousand barrels of oil equivalent per day (MBoe/D), implying an improvement from 1,261 MBoe/D in the year-ago period. Higher overall production may have partially offset the negative impacts of lower commodity prices.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for ConocoPhillips this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here as you will see below.

Earnings ESP: Earnings ESP for the company is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at 78 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: ConocoPhillips currently carries a Zacks Rank #5 (Strong Sell).

Q2 Earnings Highlight

In the last reported quarter, the upstream energy company’s earnings of $1.01 per share missed the Zacks Consensus Estimate of $1.04 and declined from the year-ago figure of $1.09, primarily due to lower realized commodity prices.  

Energy Stocks With Favorable Combination

While earnings beat looks uncertain for ConocoPhillips, here are some companies from the energy space that you may want to consider on the basis of our model, which shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Rattler Midstream LP RTLR has an Earnings ESP of +13.76% and a Zacks Rank of 3. The company is slated to announce third-quarter 2019 earnings on Nov 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Phillips 66 PSX has an Earnings ESP of +4.50% and a Zacks Rank of 3. The company is slated to announce third-quarter 2019 earnings on Oct 25.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +10.13% and is a #3 Ranked player. The company is scheduled to release third-quarter 2019 earnings on Nov 5.

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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.

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