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Is a Beat in Store for Denbury (DNR) This Earnings Season?

Zacks Equity Research
Stericycle (SRCL) is progressing well with Business Transformation initiatives. However, high debt and declining revenues from Communication and Related Services businesses are headwinds.

Denbury Resources Inc DNR is expected to release fourth-quarter 2018 results on Feb 27.

The Plano, TX-based company has an impressive earnings surprise history. The company beat the Zacks Consensus Estimate in all of the prior four quarters, the average being 42.4%.

Let’s see how things are shaping up for this announcement.

Which Way are Estimates Trending?

Let’s have a look at the estimate revision trend to get a clear picture of what analysts are thinking about the company before earnings release.

The Zacks Consensus Estimate of 9 cents for the fourth quarter has seen no upward and downward revisions by firms in the past seven days. It reflects a decline of 25% from the year-ago quarter’s figure.

Further, the Zacks Consensus Estimate for fourth-quarter revenues is pegged at $327.5 million, reflecting an improvement of 0.3% from the year-ago quarter’s figure.

What Does the Zacks Model Unveil?

Our proven model shows that Denbury is likely to beat the Zacks Consensus Estimate in the to-be-reported quarter. This is because a stock needs to have 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: Denbury has an ESP of +14.29% as the Most Accurate Estimate is at 10 cents, while the Zacks Consensus Estimate is pegged at 9 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Denbury carries a Zacks Rank #3.

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.

Factors at Play

Denbury is among the leading oil explorers and producers, with presence in the Gulf Coast and Rocky Mountain.

With its unique profile, compelling economics and unmatched infrastructure, Denbury is positioned well to deliver long-term sustainable growth. Moreover, the company’s niche, highly specialized strategy to increase oil recovery from mature depleted oil fields through tertiary CO2 flooding will help it grow in the future.

Denbury is committed to raise shareholders’ value. In this respect, the acquisition of Penn Virginia for about $1.7 billion is noteworthy. Also, it will be immediately accretive to cash flow per share.

The company expects 2018 production in the range of 60,000-64,000 barrels of oil equivalent per day (BOE/d), up roughly 3% year over year.

Considering these factors, we believe the company is well placed to take advantage of recovery in commodity prices.

Energy Stocks With Favorable Combination

Here are some companies from the energy space, which according to our model, have the right combination of elements to beat estimates in the quarter to be reported.

Par Pacific Holdings, Inc PARR has a Zacks Rank #2 and Earnings ESP of +18.87%. The company is scheduled to report quarterly results on Mar 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cheniere Energy, Inc LNG has Earnings ESP of +50.40% and a Zacks Rank #3. The company is scheduled to release quarterly results on Feb 26.

Southwestern Energy Company SWN has Earnings ESP of +6.06% and a Zacks Rank #3. The company is scheduled to release results on Feb 28.

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Southwestern Energy Company (SWN) : Free Stock Analysis Report
 
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