U.S. Markets closed

What's in Store for Southwestern Energy's (SWN) Q3 Earnings?

Zacks Equity Research
1 / 2

What's in Store for Southwestern Energy's (SWN) Q3 Earnings?

Southwestern Energy's (SWN) upstream business is likely to get a boost from rise in total natural gas equivalent production. However, gas volumes gathered from Midstream services are expected to fall year over year.

Southwestern Energy Company SWN is set to release third-quarter 2018 results after the closing bell on Oct 25.  

In the trailing four quarters, the Spring, TX-based company delivered an average positive earnings surprise of 6.5%, beating estimates thrice. Let’s see how things are shaping up for this announcement.    

Southwestern Energy Company Price and EPS Surprise

Southwestern Energy Company Price and EPS Surprise | Southwestern Energy Company Quote

Which Way are Estimates Trending?

Let’s take a look at the estimate revision trend in order 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 of 20 cents has seen five upward and three downward revisions in the past 30 days. It reflects year-over-year growth of more than 200%.

Factors at Play

The Zacks Consensus Estimate for third-quarter total oil production is pegged at 933 thousand barrels (Mbbls), up from 663 Mbbls in the year-ago period and 723 Mbbls in the last reported quarter. The Zacks Consensus Estimate for total gas production for the July-September quarter is 213 billion cubic feet (Bcf), up from 205 Bcf in the year-ago period and 201 Bcf in the last reported quarter. The Zacks Consensus Estimate for the quarter’s total production is pegged at 250 billion cubic feet equivalent (Bcfe), up from 232 Bcfe in the year-ago period and 234 Bcfe in second-quarter 2018.     

Moreover, the Zacks Consensus Estimate for average oil price per barrel (including hedges) is $60, up from $40.49 in the prior-year quarter and $59 in the last reported quarter. The Zacks Consensus Estimate for average realized gas price is pinned at $2.01 per thousand cubic feet (Mcf), up from $1.97 in third-quarter 2017 but down from $ 2.11 in the second quarter of 2018.

The probable increase in total natural gas equivalent production will support the top line for the upstream business, accompanied by higher expected price of natural gas compared with the year-ago period.

The Zacks Consensus Estimate for third-quarter gas volumes gathered from Midstream services is pegged at 114 Bcf, reflecting a decline from 123 Bcf in the year-ago period. However, it is higher than the second quarter’s 106 Bcf.

What Does Our Model Unveil?

Our proven model does not conclusively show that Southwestern Energy will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Earnings ESP: Earnings ESP represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate. The energy player has an ESP of -1.70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Southwestern Energy currently carries a Zacks Rank #2. Though a Zacks Rank of #2 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.  

Meanwhile, 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.

Stocks to Consider

Here are some companies from the oil and gas energy sector, which, according to our model, have the right combination of elements to post an earnings beat in the to-be-reported quarter:

Plano, TX-based Denbury Resources Inc. DNR has a Zacks Rank #1 and an Earnings ESP of +13.04%. The company will report third-quarter earnings on Nov 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Woodlands, TX-based Anadarko Petroleum Corporation APC holds a Zacks Rank #2 and has an Earnings ESP of +1.90%. The company is scheduled to report third-quarter earnings on Oct 30.

Oklahoma City, OK-based Chaparral Energy, Inc. CHAP carries a Zacks Rank #2 and has an Earnings ESP of +71.43%. The company is anticipated to report quarterly results on Nov 13.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Southwestern Energy Company (SWN) : Free Stock Analysis Report
 
Denbury Resources Inc. (DNR) : Free Stock Analysis Report
 
Anadarko Petroleum Corporation (APC) : Free Stock Analysis Report
 
Chaparral Energy, Inc. (CHAP) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research