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Factors to Consider Ahead of BP's Q1 Earnings Release

Zacks Equity Research
Oil equivalent volumes from key upstream projects along with increased contributions from fuels marketing businesses back BP's better-than-expected Q1 earnings.

BP plc BP is set to report first-quarter 2019 earnings on Apr 30, before the opening bell.

The British energy giant managed to beat the Zacks Consensus Estimate in three of the past four quarters, the average beat being 21%. Let’s see how things are shaping up for this announcement.

Factors to Consider

Through the first quarter, both West Texas Intermediate (WTI) crude and Brent oil made significant recovery. Tightening of crude supplies, thanks to production cut by the OPEC, and a favorable global economy backed the gains. The favorable oil pricing scenario is likely to reflect in BP’s first-quarter upstream operation results.  

Unlike upstream operations, the integrated energy firm’s downstream businesses are likely to be affected by the crude recovery. This is because refineries use raw crude for producing end products like gasoline. In fact, the global Refining Marker Margin declined sequentially from $11 per barrel to $10.2 per barrel, added BP.

Overall, although the upstream business seems lucrative, the scenario could be quite the opposite for the refining business.

What Our Model Indicates

Our proven model does not conclusively suggest a beat for BP this earnings season. 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 estimates. That is not the case here as you will see below. 

Earnings ESP: Earnings ESP for the company is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 68 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. 

Zacks Rank: BP has a Zacks Rank #3, which increases the predictive power of ESP. But we also need a positive ESP to be confident of a beat.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

Here are some companies from the energy sector which, according to our model, have the right combination of elements to post an earnings beat this quarter: 

Apache Corporation APA has an Earnings ESP of +6.67% and a Zacks Rank #2. The company is slated to announce first-quarter earnings on May 1. You can see the complete list of today’s Zacks #1 Rank stocks here.  

Devon Energy Corp. DVN is set to report first-quarter earnings on Apr 30. The stock has an Earnings ESP of +21.28% and a Zacks Rank of 2.

Cabot Oil & Gas Corporation COG has an Earnings ESP of +2.14% and a Zacks Rank of 2. The company is anticipated to release first-quarter earnings on Apr 26.

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BP p.l.c. (BP) : Free Stock Analysis Report
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