EXCO Resources (XCO): Will it Miss this Earnings Season? - Analyst Blog
EXCO Resources Inc. (XCO), an upstream energy firm, will release its fourth-quarter 2014 financial results on Feb 24, 2015, after the closing bell.
In the prior four quarters, the company reported an average negative earnings surprise of 14.47%. EXCO Resources currently has a Zacks Rank #4 (Sell). Let’s see how things are shaping up for this announcement.
Factors Affecting this Quarter
EXCO Resources in its recent operational update on Feb 9, 2015, declared that it has produced roughly 31 billion cubic feet equivalent of natural gas during the entire fourth quarter of 2014. Following the trend seen the previous quarters, we can project that about 89% of the total output will be natural gas.
During the October to December quarter, natural gas traded much lower than the commodities’ marginal cost of production − usually $5-$6 per MMBtu − in North America.
Crude oil, the other commodity which the exploration and production company produces a little more than 10%, experienced a free fall in price in the fourth quarter.
Following the weak commodity prices, we can conclude that the business environment was not favorable for the company to beat our estimate. EXCO Resources’ dividend suspension announcement last December also reflects its weak operational activities.
Earnings Whispers?
Our proven model does not conclusively show that EXCO Resources will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.
Zacks ESP: This is because the Most Accurate estimate stands at 0 cent per share, compared with the Zacks Consensus Estimate of a loss of 1 cent, resulting in a +100.00% ESP.
Zacks Rank: EXCO Resources’ Zacks Rank #4 (Sell) complicates our forecasting power. As it is, we caution against stocks with a Zacks Ranks #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some energy companies worth considering as our model shows that they have the right combination of elements to post an earnings beat this quarter.
Holly Energy Partners L.P (HEP) has an Earnings ESP of +7.90% and a Zacks Rank #2. The partnership is likely to release earnings on Feb 24.
Ferrellgas Partners LP (FGP) has an Earnings ESP of +1.82% and a Zacks Rank #3. The partnership is slated to release earnings on Mar 9.
Global Partners LP (GLP) has an Earnings ESP of +75.00% and a Zacks Rank #2. The partnership is expected to release earnings on Mar 12.
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EXCO RESOURCES (XCO): Free Stock Analysis Report
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