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Emerge Energy Services (EMES): What Will Q3 Earnings Unveil?

Nilanjan Choudhury

Fracking sand player Emerge Energy Services L.P. EMES is set to release its third-quarter 2017 results before the opening bell on Wednesday, Nov 1.

In the preceding three-month period, the partnership recorded a negative earnings surprise of 22.22% on shipping bottlenecks that led to unplanned plant shutdowns.

In terms of earnings surprise history, Emerge Energy Services has a dismal record. It missed estimates in each of the last four quarters.

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

Factors to Consider This Quarter

The crude glut over the last three years and the resultant price erosion has lowered the demand for fracking sand. Additionally, Emerge Energy Services’ huge debt pile continue to hinder its ability to invest in its business.

In particular, a new mine capacity in the Permian that is slated to use regional sand 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.

Earnings Whispers

Our proven model 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, is -26.32%. This is because the Most Accurate Estimate stands at a loss of 8 cents, while the Zacks Consensus Estimate is pegged narrower, at a loss of 6 cents.

Zacks Rank: Emerge Energy Services’ Zacks Rank #4 (Sell) further decreases the predictive power of ESP, making us less confident of an earnings surprise call. 

As it is, we caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Unit Performance: Emerge Energy Services has lost 8.6% of its value during the third quarter versus the 6.5% gain of its industry.

Stocks to Consider

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

Canadian Natural Resources Limited CNQ has an Earnings ESP of +1.08% and a Zacks Rank #1. The partnership is anticipated to release earnings on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Denbury Resources Inc. DNR has an Earnings ESP of +100% and a Zacks Rank #2. The company is likely to release earnings on Nov 7.

Murphy Oil Corporation MUR has an Earnings ESP of +11.72% and a Zacks Rank #2. The company is likely to release earnings on Nov 1.

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