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Will Cost Control Aid Helmerich & Payne's (HP) Q4 Earnings?

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Zacks Equity Research
·5 min read
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Helmerich & Payne, Inc. HP is set to release fourth-quarter fiscal 2020 results after the closing bell on Thursday Nov 19. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 80 cents per share while the same for revenues is $212.37 million.

Let’s delve into the factors that might have impacted this oil and gas contract driller’s performance in the September quarter.

Factors at Play for Q4 Results

The slump in oil prices ramped down the drilling activity, spreading a cloud of uncertainty around the exploration and production (E&P) spending outlook. As a supplier of technology, solution and parts to the E&P sector, Helmerich & Payne is not immune to this bearish market condition either. This trend is most likely to have continued in the quarter to be reported as well.

However, the company managed to shield itself from this bleak scenario to some extent through robust pricing in the super-spec market space. Evidently, Helmerich & Payne’s average rig revenue per day in the U.S. Land segment rose almost 7% year over year to $27,975 in the fiscal third quarter. Even though daily revenues are unlikely to have increased in the to-be-reported quarter, the same might have achieved a decent figure. The Zacks Consensus Estimate for the metric is pegged at $20,770. This should improve chances of an outperformance in the fiscal fourth quarter. 

Moreover, the company executed a fairly admirable job at reducing costs. Helmerich & Payne’s cash outflows in the form of capital expenditure continue to fall as it reins in its spending levels. The company boasts substantially lower drilling expenses for its technologically advanced rig fleet while realizing sizeable savings from cutting its dividends. All these upsides are expected to have pushed up Helmerich & Payne’s earnings and cash flows in the fiscal fourth quarter.

What Does Our Model Say?

Our proven model does not conclusively predict an earnings beat for Helmerich & Paynethis season. The combination of a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Helmerich & Payne has an Earnings ESP of 0.00%.

Zacks Rank: Helmerich & Paynecarries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q3 Earnings & Surprise History

In the last reported quarter, this Tulsa, OK-based drilling rig provider reported adjusted loss of 34 cents per share, narrower than the Zacks Consensus Estimate of 67 cents. The outperformance reflects better-than-expected results from the key North America Solutions segment as lower costs propped up average rig margins. However, the bottom-line came against the year-ago adjusted earnings of 40 cents per share due to a steep decline in activity.

Meanwhile, operating revenues of $317.4 million topped the Zacks Consensus Estimate of $304 million but decreased 53.9% from the year-ago level.

As far as earnings surprises are concerned, Helmerich & Payne, which trimmed its fiscal 2020 capital program and dividend payouts to survive the crude mayhem, is on a sound footing. Notably, its earnings surpassed the Zacks Consensus Estimate in three of the last four reports while missing the same on the remaining quarter, the average surprise being 20.79%. This is depicted in the graph below:

Helmerich & Payne, Inc. Price and EPS Surprise

Helmerich & Payne, Inc. Price and EPS Surprise
Helmerich & Payne, Inc. Price and EPS Surprise

Helmerich & Payne, Inc. price-eps-surprise | Helmerich & Payne, Inc. Quote

Stocks to Consider

While earnings outperformance looks uncertain for Helmerich & Payne, here are some firms worth considering from various sectors, which according to our model, have the perfect combination of ingredients to deliver a beat this reporting cycle:

Cabot Corporation CBT has an Earnings ESP of +40.22% and a Zacks Rank of 3. The company is scheduled to release earnings on Nov 23.

Caseys General Stores, Inc. CASY has an Earnings ESP of +3.32% and is Zacks #1 Ranked. The company is scheduled to release earnings on Dec 7.

Best Buy Co., Inc. BBY has an Earnings ESP of +14.92% and is Zacks #2 Ranked. The company is scheduled to release earnings on Nov 24.

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