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Chesapeake (CHK) Gears Up for Q2 Earnings: What's in Store?

Zacks Equity Research

Chesapeake Energy Corporation CHK is scheduled to release second-quarter 2019 results on Aug 6, before the opening bell.

In first-quarter 2019, the upstream energy player reported a negative earnings surprise of 6.67%. However, the bottom line surpassed the Zacks Consensus Estimate for earnings in three of the last four quarters, the average being 10.7%.

Let’s see how things are shaping up prior to the announcement.

Which Way Are Estimates Treading?

Let’s take a look at the estimate revision trend to get a clear picture of what analysts expect from the company’s upcoming results.

The Zacks Consensus Estimate for second-quarter loss is pegged at 7 cents, with bearish sentiments from six firms and bullish from none in the past 30 days. The figure reflects a year-over-year plunge of 146.7%.

However, the Zacks Consensus Estimate for revenues is pegged at $1.16 billion, showing an improvement of 18.4% from the year-ago quarter tally.

Chesapeake Energy Corporation Price and EPS Surprise

 

Chesapeake Energy Corporation Price and EPS Surprise

Chesapeake Energy Corporation price-eps-surprise | Chesapeake Energy Corporation Quote

Factors Likely to Affect Results

The Zacks Consensus Estimate for Chesapeake’s current-quarter production is pegged at 44.62 million barrels of oil equivalent (MMBoe), calling for a decline from 48 MMBoe a year ago.

Notably, the Zacks Consensus Estimate for natural gas production is pinned at 181 billion cubic feet (bcf), which indicates a fall from 210 bcf in the year-ago quarter. However, the Zacks Consensus Estimate for oil production is pegged at 10.91 million barrels (MMbbls), showing an improvement from 8 MMbbls in the year-ago quarter.

The Zacks Consensus Estimate for average realized price of oil (excluding gains/losses on derivatives) is pegged at $62 per barrel, showing a fall from the year-ago quarter’s price of $69. Moreover, per the consensus mark, average realized natural gas price is projected to decline 8.2% from the year-ago quarter’s tally to $2.35 per thousand cubic feet (mcf).

Since majority of Chesapeake’s production comprises natural gas, the expected decline in output and realized price of the commodity are likely to be headwinds.

Earnings Whispers

Our proven model does not show that Chesapeake is likely to beat estimates 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: Chesapeake has an ESP of -21.43%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Chesapeake carries a Zacks Rank #4 (Sell).

Please note that we caution against stocks with a Zacks Ranks #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to beat earnings this quarter.

Enbridge Inc ENB has an Earnings ESP of +5.26% and is a #2 Ranked player. The company is slated to release second-quarter 2019 earnings on Aug 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NuStar Energy L.P. NS is set to report second-quarter 2019 earnings on Aug 8. The stock has an Earnings ESP of +14.58% and a Zacks Rank #3.

Cheniere Energy, Inc. LNG is set to report second-quarter 2019 earnings on Aug 8. The stock has an Earnings ESP of +88.46% and a Zacks Rank #2.

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