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Cimarex (XEC) Gears Up for Q2 Earnings: What's in the Cards?

Zacks Equity Research

Cimarex Energy Co. XEC is set to release second-quarter 2019 results on Aug 5, after the closing bell.

In the last reported quarter, the upstream energy player posted a negative earnings surprise of 12.4%. However, the company surpassed the Zacks Consensus Estimate twice in the last four quarters, with a four-quarter average positive earnings surprise of 7.2%.

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

The Zacks Consensus Estimate of $1.20 for second-quarter 2019 earnings has been revised downward in the past seven days. The figure indicates a year-over-year decline of almost 24.5%.

Nonetheless, the consensus estimate for revenues of $595.3 million suggests an increase of 7% from the year-ago quarter.

Now let’s take a look at the factors that will possibly give shape to the upcoming results.

Factors to Consider

The Zacks Consensus Estimate for the company’s second-quarter production from the prolific Permian basin is pegged at 179 thousand barrels of oil equivalent per day (MBoe/d), indicating a rise from 121.7 MBoe/d in the year-earlier period.

From the Mid-Continent region, the Zacks Consensus Estimate for production stands at 90 MBoe/d, higher than the year-ago quarter’s 88.9 MBoe/d.

Owing to higher expected production volumes from the Permian and the Mid-Continent areas, total production is likely to increase by a solid margin. The Zacks Consensus Estimate for the explorer’s total production for the June quarter of 2019 is pegged at 270 MBoe/d, up from 211.4 MBoe/d in the year-ago quarter. 

Although the quarterly production picture looks favorable and is likely to support the bottom line, the expected realized prices of the commodities tell a different tale. Notably, the Zacks Consensus Estimate for average realized natural gas price of $1.09 per thousand cubic feet calls for a decline from the year-ago reported figure of $1.65.

Moreover, the Zacks Consensus Estimate for average realized oil price is $55 per barrel, implying a decline from the year-ago $61. Also, the Zacks Consensus Estimate for average realized natural gas liquids price of $15.80 per barrel suggests a decline from the year-ago reported figure of $22.29.

Cimarex Energy Co Price and EPS Surprise

 

Cimarex Energy Co Price and EPS Surprise

Cimarex Energy Co price-eps-surprise | Cimarex Energy Co Quote

Earnings Whispers

Our proven model does not suggest a beat for Cimarex this earnings season. That 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. That is not the case here as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -2.56%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cimarex currently carries a Zacks Rank #3. Though a Zacks Rank of 3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.     

Conversely, Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

Energy Stocks With Favorable Combination

While an earnings beat looks uncertain for Cimarex, here are a few companies from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post a beat this quarter:

TC Energy Corporation TRP has an Earnings ESP of +0.98% and a Zacks Rank #2. The company is anticipated to release earnings on Aug 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Callon Petroleum Company CPE has an Earnings ESP of +0.84% and a Zacks Rank #3. The company is set to release earnings on Aug 6.

Independence Contract Drilling, Inc. ICD has an Earnings ESP of +18.18% and a Zacks Rank #3. The company is anticipated to release earnings on Aug 1.

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