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Is a Beat Likely for Berry Petroleum (BRY) in Q2 Earnings?

Zacks Equity Research

We expect Berry Petroleum Corporation BRY to beat expectations when it reports second-quarter 2019 results after the closing bell on Wednesday, Aug 7. The current Zacks Consensus Estimate for the quarter under review is a profit of 36 cents per share on revenues of $148.7 million.

In the preceding three-month period, the Dallas, TX-based oil and gas producer came out with weaker-than-expected earnings. The underperformance stemmed from slightly lower crude output from California – the company’s area of focus – and a spike in operating expenses due to a surprise increase in natural gas prices in California.

As far as earnings surprises are concerned, the firm is on a slippery slope, having not gone past the Zacks Consensus Estimate in the last four reports. This is depicted in the graph below:

Berry Petroleum Corporation Price and EPS Surprise


Berry Petroleum Corporation Price and EPS Surprise

Berry Petroleum Corporation price-eps-surprise | Berry Petroleum Corporation Quote

Investors are keeping their fingers crossed and hoping that the upstream company can overcome the dismal trend and surpass earnings estimate this time around. Thankfully, our model indicates that Berry Petroleum might beat on earnings in the second quarter.

Let’s delve deeper and find out the factors impacting the results.

Why a Likely Positive Surprise?

Our proven model shows that Berry Petroleum is likely to beat the Zacks Consensus Estimate this quarter as it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and Zacks Rank #3 (Hold) or higher for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.70%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Berry Petroleum currently has a Zacks Rank of 3, which, when combined with a positive ESP, makes us confident of earnings beat. 

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

What is Driving the Better-Than-Expected Earnings?

We believe that the steady production growth amid a favorable cost development bode well.

Berry Petroleum’s production averaged 27.8 thousand barrels of oil equivalent per day (87% oil) in first quarter of 2019, up 6.1% from the year-ago period. The company’s high-return, low-risk drilling locations are likely to generate substantial volume growth in the to-be-reported quarter as well. With more than 100 years of experience in extracting conventional oil in California, Berry Petroleum enjoys a dedicated market with little competitive threat. California’s Brent-weighted market is another advantage for the company as it can claim a higher price for its produce.

Secondly, Berry Petroleum has hedged a substantial portion of natural gas that it buys for its steam flood operations. This is likely to translate into considerable cost savings this quarter as the company was forced to purchase the commodity at exorbitant prices in the previous quarter. This should also lower operating expenses and lead to improving profits.

Other Stocks to Consider

Berry Petroleum is not the only energy company looking up this earnings season. Here are some firms from the space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

Cheniere Energy, Inc. LNG has an Earnings ESP of +88.46% and a Zacks Rank #2. The natural gas exporter is anticipated to release earnings on Aug 8. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sunoco LP SUN has an Earnings ESP of +14.64% and is Zacks #2 Ranked. The downstream operator is anticipated to release earnings on Aug 7.

Roan Resources, Inc. ROAN has an Earnings ESP of +14.71% and a Zacks Rank #3. The oil and gas exploration and production company is anticipated to release earnings on Aug 7.

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