Integrated oil and gas company Occidental Petroleum Corporation (OXY) is set to report its first-quarter 2013 results before the market open on Apr 25, 2013. Last quarter, the company posted a positive earnings surprise of 10.24%. Let’s see how things are shaping up prior to this announcement.
Factors to Consider This Quarter
The first quarter was volatile for the oil industry as the oil companies continued to face challenges from unstable oil pricing, rising utilization of alternate energy for power generation, stiffer competition among natural gas producers and curtailed production in the manufacturing sector.
As Occidental Petroleum is a crude oil-levered company with no refining operations, its earnings depend highly on crude oil price movements. So, in a volatile crude price scenario, the company’s performance will suffer more than that of its peers.
In first-quarter 2013, Occidental Petroleum’s production and sales volume are expected to decline sequentially. The impact of full cost recovery on certain production sharing agreements, a set-up turnaround in Qatar and pipeline distractions in Colombia will result in lower production; while the timing of liftings in the Middle East and North Africa will restrict the sales figure.
Our proven model does not conclusively show that Occidental Petroleum is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.
Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.53, while the Zacks Consensus Estimate is pegged at $1.60. This comes to a difference of -4.38% ESP.
Zacks Rank #3 (Hold): Occidental Petroleum with Zacks Rank #3 (Hold), enhances the possibility of an earnings surprise. However, the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.
We also caution against stocks with Zacks Ranks #4 and 5 (Sell) going into the earnings announcement, especially when the company is experiencing a negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies from the sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Chevron Corporation (CVX) has earnings ESP of +0.65% and Zacks Rank #3 (Hold).
ConocoPhillips (COP) has earnings ESP of +1.44% and Zacks Rank #3 (Hold).
Murphy Oil Corporation (MUR) has earnings ESP of +2.08% and Zacks Rank #3 (Hold).
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