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Encana (ECA) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Encana Corporation ECA is set to release third-quarter 2019 results before the opening bell on Thursday, Oct 31. The current Zacks Consensus Estimate for the to-be reported quarter is a profit of 14 cents on revenues of $1.7 billion.

The Zacks Consensus Estimate for third-quarter earnings has been revised downward 12.5% in the past 30 days. Given this backdrop, let’s delve into the factors that might have influenced the company’s performance in the September quarter.

Factors to Consider This Quarter

Following the $7.7-billion Newfield buyout in February, Encana has successfully repositioned the asset base to focus on its Core 3 liquids plays, namely Permian, Anadarko and Montney, with enviable production growth prospects. Reflecting the continued increase in volumes, the Zacks Consensus Estimate for total daily production indicates surge from 378,200 barrels of oil equivalent per day (BOE/d) to 585,000 BOE/d year over year. In particular, our model estimates liquids output (accounting for 55% of the total) in the third quarter to be 322 BOE/d, surging from 178.7 BOE/d a year ago.

However, the positive effect of production gain was likely offset by lower realized commodity prices. The Zacks Consensus Estimate for third-quarter 2019 liquids price per barrel is $44.08, indicating a 22.9% decline from the year-earlier reported number of $57.16. Meanwhile, Encana is likely to have fetched $1.70 by selling a thousand cubic feet of natural gas, as against $1.99 in the third quarter of 2018.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Encana is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and 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: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, for this company stands at -1.01%.

Zacks Rank: Encana carries a Zacks Rank of 3.

Highlights of Q2 Earnings & Surprise History

In the last reported quarter, the Calgary-based company beat the consensus mark on the back of increased production volumes and higher oil price realizations. Encana reported operating earnings per share of 21 cents that surpassed the Zacks Consensus Estimate by 4 cents and was in line with the year-ago profit.

Revenues of $2.1 billion surpassed the Zacks Consensus Estimate of $1.7 billion and more than doubled from the second-quarter 2018 sales.

As far as earnings surprises are concerned, the Canadian oil and natural gas producer is on an excellent footing, having gone past the Zacks Consensus Estimate in each of the last four reports. This is depicted in the graph below:

Encana Corporation Price and EPS Surprise

 

Encana Corporation Price and EPS Surprise

Encana Corporation price-eps-surprise | Encana Corporation Quote

Stocks to Consider

While earnings beat looks uncertain for Encana, 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 season:

Continental Resources, Inc. CLR has an Earnings ESP of +4.6% and is Zacks #3 Ranked. The company is scheduled to release earnings on Oct 30.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gulfport Energy Corporation GPOR has an Earnings ESP of +3.57% and a Zacks Rank #3. The company is scheduled to release earnings on Oct 31.

Concho Resources, Inc. CXO has an Earnings ESP of +1.91% and is Zacks #3 Ranked. The company is scheduled to release earnings on Oct 29.

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