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Will EQT Corporation (EQT) Disappoint Earnings in Q3?

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EQT Corp.EQT is expected to report third-quarter 2015 earnings on Oct 22, before the market opens.

In the last quarter, the company's earnings of $0.01 per share came in line with the Zacks Consensus Estimate. The bottom line, however, plunged 98% from $0.61 in the year-earlier quarter. Let's see how things are shaping up prior to the announcement.

Factors Likely to Affect Earnings

EQT Corp. is a low-cost producer with a strategic midstream presence. The company's superior cost structure and above-average growth may ease concerns about struggling natural gas prices . With an increasing reserve structure and a higher number of Marcellus wells that are likely to be drilled over the next five years, the company exhibited industry-leading organic growth momentum during the third quarter. This should, therefore, be reflected in the company's soon to be released earnings.

The revised capital budget of $1.85 billion for EQT production lowers drilling of Marcellus and Permian wells by 59 and five, respectively. However, with 168 wells awaiting completion and 23 wells in the pipeline, the company is well positioned to deliver its originally guided production growth of 1.6 billion cubic feet equivalent (Bcfe) per day by the end of 2015.

Despite lowering its 2015 capital budget to $2.05 billion from $2.5 billion, the company maintained its earlier production target of 575-600 Bcfe. EQT Corp. is expected to continue delivering consistent production growth on the back of its E&P segment.

However, the company remains highly exposed to volatile natural gas fundamentals and weak commodity prices, which might lead it to perform below our expectations.

EQT Corp.'s various multilateral drilling programs across its oil and gas fields face operational headwinds like rising service costs, completion delays and equipment failures. These may have an adverse effect on the company's earnings.

Currently, EQT Corp. is drilling its first Pennsylvania Utica well in Greene County. The company faced higher-than-expected pressure during the initial phase of the drilling. A higher horsepower rig was then called to salvage the situation. This has unnecessarily delayed the drilling to quite an extent. Any more of such issues are likely to affect the company's earnings going forward.

Earnings Whispers

Our proven model does not conclusively show that EQT Corp. is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 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 currently pegged at -4.55%. The Most Accurate estimate for EQT Corp. stands at a loss of 23 cents, while the Zacks Consensus Estimate is pegged higher at 22 cent.

Zacks Rank : EQT Corp. carries a Zacks Rank #3 (Hold). Though Zacks Rank # 3 increases the predictive power of ESP, the company's ESP of -4.55% makes surprise prediction difficult.

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

Other Stocks to Consider

Here are some other companies from the energy sector that, according to our model, have the right combination of elements to post an earnings beat this quarter:

Natural Gas Services Group Inc. NGS has an Earnings ESP of +21.05% and a Zacks Rank #1 (Strong Buy).

Sprague Resources LP SRLP has an Earnings ESP of +100.00% and a Zacks Rank #1.

Spectra Energy Partners, LP SEP has an Earnings ESP of +9.33% and a Zacks Rank #2 (Buy).

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EQT CORP (EQT): Free Stock Analysis Report

SPECTRA EGY PTR (SEP): Free Stock Analysis Report

NATURAL GAS SVC (NGS): Free Stock Analysis Report

SPRAGUE RESRCS (SRLP): Free Stock Analysis Report

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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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