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Emerge Energy Services (EMES): What Will Q2 Earnings Unveil?

Nilanjan Choudhury
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Fracking sand player Emerge Energy Services L.P. EMES is expected to release second-quarter 2018 results before the opening bell onWednesday, Aug 1. The current Zacks Consensus Estimate for the quarter under review is a profit of 38 cents on revenues of $122.6 million.

In the preceding three-month period, the partnership missed the consensus mark by 16.7% on railroad network congestion that adversely affected volumes sold.

As far as earnings surprises are concerned, the Fort Worth, TX-based energy player is on a slippery slope, having gone past the Zacks Consensus Estimate just once in the last four reports. This is depicted in the graph below:

Emerge Energy Services LP Price and EPS Surprise

Emerge Energy Services LP Price and EPS Surprise | Emerge Energy Services LP Quote

Investors are keeping their fingers crossed and hoping that Emerge Energy Services can put an end to its dismal surprise trend. However, our model indicates that the partnership might not beat on earnings this time around too.

Let’s delve deep to find out the factors likely to impact Emerge Energy Services’ second-quarter results.

Factors to Consider This Quarter

With the frack sand market expected to clock massive growth in 2018, Emerge Energy Services is likely to see a steep rise in total sand volumes sold. Last quarter, the partnership saw its volumes jump 7% sequentially to a new record. Accompanied by higher prices, the pure-play frac sand supplier is expected to reap rich rewards.

In particular, poor railroad service has undermined the pricing outlook for existing sand suppliers. Moreover, mounting preparation cost and expenses associated with pulling railcars out of storage to quickly ramp up the utilization is also expected to play spoilsport. Additionally, Emerge Energy Services’ huge debt pile continue to hinder its ability to invest in its business.

What Does Our Model Say?

Our proven model too does not conclusively show that Emerge Energy Services will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for Marathon Petroleum stands at 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate both stand at 38 cents.

Zacks Rank: Emerge Energy Services is #3 Ranked. Though a Zacks Rank of 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

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

While earnings beat looks uncertain for Emerge Energy Services, here are some firms 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 earnings beat this quarter:

Penn Virginia Corp. PVAC has an Earnings ESP of +6.72% and a Zacks Rank #1. The company is anticipated to release earnings on Aug 7. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Murphy Oil Corp. MUR has an Earnings ESP of +5.99% and a Zacks Rank #2. The company is anticipated to release earnings on Aug 8.

Sanchez Energy Corp. SN has an Earnings ESP of +3.41% and a Zacks Rank #3. The firm is expected to release earnings on Aug 7.

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Emerge Energy Services LP (EMES) : Free Stock Analysis Report
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