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Is a Beat Likely for Helmerich & Payne (HP) in Q1 Earnings?

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Zacks Equity Research
·5 min read
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Helmerich & Payne, Inc. HP is set to release first-quarter fiscal 2021 results on Tuesday Feb 9, after the closing bell. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 78 cents per share while the same for revenues is $241.45 million.

Let’s delve into the factors that might have impacted this oil and gas contract driller’s performance in the December quarter.

Factors at Play for Fiscal Q1 Results

The weakness in oil prices ramped down the drilling activity, spreading a cloud of uncertainty around the exploration and production (E&P) spending outlook. Moreover, as a supplier of technology, solution and parts to the E&P sector, Helmerich & Payne is not immune to this bearish market, a trend that most likely continued in the quarter to be reported as well.

However, the company managed to shield itself from this bleak scenario to some extent through robust pricing in the super-spec market space. Evidently, Helmerich & Payne’s average rig revenue per day in the International Land segment rose almost 63% year over year to $45,986 in the fiscal fourth quarter. Even though daily revenues are unlikely to have increased to such extent in the to-be-reported quarter, the same might have achieved a decent figure. The Zacks Consensus Estimate for the metric is pegged at $29,390, indicative of higher chances of an outperformance in the fiscal first quarter.

Moreover, the company’s execution of cost-reduction efforts was fairly admirable. Helmerich & Payne’s cash outflows in the form of capital expenditure continue to fall as it reins in its spending levels. The company boasts substantially lower drilling expenses for its technologically advanced rig fleet while realizing sizeable savings from its dividend cuts. All these upsides are expected to have driven Helmerich & Payne’s earnings and cash flows in the fiscal first quarter.

What Does Our Model Say?

Our proven Zacks model predicts an earnings beat for Helmerich & Payne this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates, which is the case here.

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

Earnings ESP: Helmerich & Paynehas an Earnings ESP of +3.79%.

Zacks Rank: Helmerich & Paynecarries a Zacks Rank #3, which increases the predictive power of ESP.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q4 Earnings & Surprise History

In the fourth quarter of fiscal 2020, this Tulsa, OK-based drilling rig provider reportedan adjusted quarterly loss of 74 cents per share, narrower than the Zacks Consensus Estimate of a loss of 80 cents owing to better-than-expected revenues from the International Solutions segment. Precisely, this unit generated operating revenues of $24 million, beating the Zacks Consensus Estimate of $17.13 million. However, the bottom line came against the year-ago earnings of 39 cents per share. This underperformance can be attributed to a steep decline in rig activity as a result of coronavirus-induced lower crude prices.

Meanwhile, operating revenues of $208.27 million missed the Zacks Consensus Estimate of $212 million and also decreased 67.9% from the year-ago level of $649.05 million.

As far as earnings surprises are concerned, Helmerich & Payne is on a sound footing. Notably, its earnings surpassed the Zacks Consensus Estimate in three of the last four reports while missing the same in the remaining quarter, the average surprise being 7.04%. This is depicted in the graph below:

Helmerich & Payne, Inc. Price and EPS Surprise

Helmerich & Payne, Inc. Price and EPS Surprise
Helmerich & Payne, Inc. Price and EPS Surprise

Helmerich & Payne, Inc. price-eps-surprise | Helmerich & Payne, Inc. Quote

Other Stocks to Consider

Some other firms worth considering from the energy space on the basis of our model that shows that these too have the right combination of elements to beat on earnings this season are as follows:

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +22.18% and is a #3 Ranked stock, currently. The firm is scheduled to release earnings on Feb 9.

Nabors Industries Ltd. NBR has an Earnings ESP of +4.35% and is Zacks #3 Ranked, currently. The company is scheduled to release earnings on Feb 17.

Diamondback Energy, Inc. FANG has an Earnings ESP of +8.23% and a Zacks Rank of 2, currently. The company is scheduled to release earnings on Feb 22.

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