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Chesapeake (CHK) to Post Q1 Earnings: What's in the Cards?

Zacks Equity Research
In spite of the rising global oil prices and Canada's vast endowments of oil and gas resources, the oil sector of the country is likely to bear the brunt of inefficient regulations and pipeline crisis.

Chesapeake Energy Corporation CHK is scheduled to release first-quarter 2019 results on May 8, before the opening bell.

The company managed to beat the Zacks Consensus Estimate in the past four quarters, the average surprise being 21.4%. Let’s see how things are shaping up prior to the announcement.

Which Way Are Estimates Treading?

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

The Zacks Consensus Estimate for first-quarter earnings is pegged at 15 cents, with bullish sentiments from four firms and bearish from two in the past 30 days. The figure indicates a year-over-year plunge of almost 56%.

Further, the Zacks Consensus Estimate for revenues is pegged at $1.1 billion, suggesting a decline of 12% from the year-ago quarter’s tally.

Factors Likely to Affect Results

Per the U.S. Energy Information Administration (EIA), the average spot prices of Henry Hub natural gas for the months of January, February and March of 2019 were recorded at $3.11 per Million Btu, $2.69 per Million Btu and $2.95 per Million Btu, respectively. In the year-ago comparable months, the average prices of the commodity were recorded at $3.87 per Million Btu, $2.67 per Million Btu and $2.69 per Million Btu, respectively – according to EIA. Hence, it is clear that the pricing scenario of natural gas for the last two months of first-quarter 2019 was better from a year ago.

Since majority of the upstream energy player’s production comprises natural gas, the favorable prices of the commodity is likely to support the explorer’s Q1 numbers.

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 -3.96%. 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 #3. Though a Zacks Rank of #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

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.

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.

TC PipeLines, LP TCP has an Earnings ESP of +1.08% and a Zacks Rank #3. The company is slated to announce first-quarter earnings on May 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

C&J Energy Services, Inc. CJ has Earnings ESP of +10.14% and a Zacks Rank #3. The company is scheduled to release quarterly results on May 7.

Evolution Petroleum Corporation, Inc. EPM has Earnings ESP of +12.50% and a Zacks Rank #2. The company is scheduled to release results on May 8.

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TC PipeLines, LP (TCP) : Free Stock Analysis Report
 
Evolution Petroleum Corporation, Inc. (EPM) : Free Stock Analysis Report
 
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