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Will Ensco (ESV) Disappoint Investors This Earnings Season?

Zacks Equity Research

Ensco plc ESV, a leading supplier of offshore contract drilling services to the oil and gas industry, is scheduled to report third-quarter 2017 results on Oct 26, before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 16.67%. Moreover, Ensco delivered an average positive earnings surprise of 63.91% over the last four quarters.

Which Way Are Estimates Treading?

Let’s take a look at the estimate revisions in order to get a clear picture of analyst opinion on the stock before the earnings release.

The Zacks Consensus Estimate of a loss of 16 cents for the third quarter has widened from a loss of 15 cents over the last 30 days, with two firms revising downward. The consensus estimate reflects a year-over-year decline of about 163.3%.

Further, analysts polled by Zacks expect revenues of $454 million for the third quarter, down 17.2% from the year-ago quarter.

Factors to Consider

The count of rig exploring for oil and natural gas during the third quarter fell from 952 to 940, per a report of oilfield services player Baker Hughes, a GE company BHGE. Lower rig operations in the U.S. resources reflect reduced activities of drillers, Ensco being no exception.

Also, eroding cash balance since 2017 is a matter of concern.

 

Since 2015, there has been a substantial decline in net cash flow from the company’s operations. This is reflecting the company’s persistent weak operations amid volatile commodity pricing scenario.

 

Price Performance in Q3

During the quarter, the company has rallied 15.7%, outperforming the industry’s 8% gain.

 

Earnings Whispers

Our proven model does not conclusively show that Ensco is likely to beat earnings 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) for this to happen. That is not the case here as you will see below.  

Zacks ESP: Earnings ESP for the company is -22.65% as the Most Accurate estimate is pegged at a loss of 19 cents, while the Zacks Consensus Estimate is at a loss of 16 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: Ensco carries a Zacks Rank #4 (Sell). Please note that we caution against stocks with Zacks Rank #4 and 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.   

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Noble Midstream Partners LP NBLX, headquartered in Houston, TX, has diversified energy infrastructure properties. The company has an Earnings ESP of +1.91% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesoro Corporation ANDV, based in San Antonio, TX, is a leading refining player. The company has an Earnings ESP of +5.02% and a Zacks Rank #3.

Gulfport Energy Corporation GPOR, headquartered in Oklahoma City, OK, is an upstream energy player. The company has an Earnings ESP of +0.97% and carries a Zacks Rank #3.

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ENSCO PLC (ESV) : Free Stock Analysis Report
 
Gulfport Energy Corporation (GPOR) : Free Stock Analysis Report
 
Noble Midstream Partners LP (NBLX) : Free Stock Analysis Report
 
Baker Hughes Incorporated (BHGE) : Free Stock Analysis Report
 
Tesoro Corporation (ANDV) : Free Stock Analysis Report
 
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