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Is a Beat in Store for Cabot (COG) This Earnings Season?

Zacks Equity Research

We expect Cabot Oil & Gas Corporation COG to beat expectations when it reports first-quarter 2019 results before the opening bell on Friday, Apr 26. The current Zacks Consensus Estimate for the quarter under review is a profit of 67 cents per share on revenues of $669 million.

In the preceding three-month period, the Houston, TX-based domestic energy explorer missed the consensus mark by 5.2% due to lower-than-anticipated production.

As far as earnings surprises are concerned, the exploration and production firm has a dismal record, having gone past the Zacks Consensus Estimate just once in the last four reports. This is depicted in the graph below.

Cabot Oil & Gas Corporation Price and EPS Surprise

 

Cabot Oil & Gas Corporation Price and EPS Surprise | Cabot Oil & Gas Corporation Quote

Investors are keeping their fingers crossed and hoping that the company can break the bearish trend by surpassing earnings estimate this time around. Thankfully, our model indicates that Cabot might beat on earnings in the first quarter.

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

Why a Likely Positive Surprise?

Our proven model shows that Cabot 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 +2.14%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Cabot currently has a Zacks Rank #2 (Buy), 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?

The surge in operating revenues from natural gas sales, coupled with increased commodity price realizations, should lead to solid earnings growth.

Our model estimates first-quarter revenues of $689 million, improving from $663.5 million in the fourth quarter and 67% above the year-ago sales of $412 million. The strong revenue growth reflects higher production from the Marcellus Shale.

Analysts polled by Zacks also envision natural gas realizations (including the impact of its hedging program) to increase, which may further buoy the company’s results. The Zacks Consensus Estimate for the average natural gas price realization in first quarter 2019 is $3.36 per thousand cubic feet, up from $2.18 a year earlier and $3.11 in the previous quarter. Importantly, Cabot’s output is totally made up of natural gas, which positions it to benefit from higher sales price of the commodity.

Other Stocks to Consider

Cabot is not the only energy firm 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:

Devon Energy Corp. DVN has an Earnings ESP of +21.28% and a Zacks Rank #2. The company is anticipated to release earnings on Apr 30.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Whiting Petroleum Corporation WLL has an Earnings ESP of +4.05% and a Zacks Rank #2. The company is anticipated to release earnings on May 1.

Continental Resources, Inc. CLR has an Earnings ESP of +3.09% and a Zacks Rank #3. The company is anticipated to release earnings on Apr 29.

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Whiting Petroleum Corporation (WLL) : Free Stock Analysis Report
 
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