Will Cameron International (CAM) Earnings Surprise in Q2?


Oil drilling equipment maker,Cameron International Corporation (CAM) is set to report second-quarter 2014 results on Jul 24.

Last quarter, Cameron posted a positive earnings surprise of 4.17%. Let’s see how things are shaping up for this announcement.  

Factors to Influence this Quarter

Along with its first-quarter results released on Apr 24, Cameron projected second-quarter adjusted earnings between 84 cents and 89 cents, which are higher than the year-ago and sequential bottom line figures of 79 cents and 75 cents, excluding one-time charges. This indicated both year-over-year and sequential increases and spread optimism on the company.

Moreover, during the entire second quarter, crude oil was traded above the $100 per barrel mark. The good pricing environment encouraged upstream companies to explore and produce more oil, which in turn created demand for oil drilling equipment. As Cameron is a leading manufacturer of pressure control equipment − used in onshore, offshore, and subsea applications for oil and gas drilling, production, and transmission – we expect it to come up with an impressive bottom line.

However, we don’t think that the pricing environment for natural gas was too favorable. After reaching a price as high as $8.15 per million British thermal unit level during the first quarter – primarily due to a harsh and prolonged winter – natural gas traded below $5.00 in the second quarter. This could hamper the profit margin of Cameron to quite an extent.

Earnings Whispers?

Our proven model does not conclusively show that Cameronis likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 88 cents. Hence, the difference is of 0.00%.

Zacks Rank: Cameron carries a Zacks Rank #2 (Buy). Though the Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies for investors to consider, which according to our model have the right combination of elements to post an earnings beat this quarter:  

Mid-Con Energy Partners, LP (MCEP) has Earnings ESP of +8.89% and a Zacks Rank #1(Strong Buy).

Callon Petroleum Company (CPE) has Earnings ESP of +7.14% and a Zacks Rank #1.

RSP Permian, Inc. (RSPP) has Earnings ESP of +3.70% and a Zacks Rank #1.

Read the Full Research Report on CAM
Read the Full Research Report on CPE
Read the Full Research Report on RSPP
Read the Full Research Report on MCEP

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