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Factors to Pay Attention to Ahead of BP's Q3 Earnings Release

Zacks Equity Research
·4 min read

BP plc BP is set to report third-quarter 2020 results on Oct 27.

In the last reported quarter, the British energy giant missed the Zacks Consensus Estimate, which was largely a reflection of drop in oil equivalent production, commodity prices and refining marker margin. Notably, despite beating the consensus estimate in two of the prior four quarters, the company posted an average negative earnings surprise of 18.2%. This is depicted in the graph below:

BP p.l.c. Price and EPS Surprise

 

BP p.l.c. Price and EPS Surprise
BP p.l.c. Price and EPS Surprise

BP p.l.c. price-eps-surprise | BP p.l.c. Quote

Let’s see how things have shaped up prior to this announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter loss per share of 14 cents has witnessed two downward revisions over the past 30 days. The estimated figure suggests a decline of 121.2% from the prior-year reported number.

The consensus estimate for third-quarter revenues of $56.6 billion indicates an 18.4% decline from the year-ago reported figure.

Factors to Consider

Although the price of crude oil in the September quarter recovered sequentially, thanks to easing of social-distancing measures, the commodity’s price was below the year-ago quarter level.

Also, the dip in oil prices is likely to have affected the integrated energy major’s total production volumes. Notably, the consensus estimate for total hydrocarbon production is pinned at 2,436 thousand barrels of oil equivalent per day (MBoE/D), suggesting a drop from the year-ago quarter’s 2,568 MBoE/D.

We also expect the pandemic to have hurt the integrated firm’s refinery throughputs year over year, in the third quarter. It is to be noted that the Zacks Consensus Estimate for the same is pegged at 1,528 thousand barrels per day (MBbl/D), suggesting a decline from 1,813 MBbl/D reported in the September quarter of 2019.

Earnings Whispers

Our proven model does not indicate an earnings beat for BP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is +46.20% as the Most Accurate Estimate of a loss of 8 cents per share is narrower than the Zacks Consensus Estimate of a loss of 14 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BP currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

While an earnings beat looks uncertain for BP, here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Cabot Oil & Gas Corporation COG has an Earnings ESP of +6.52% and is a Zacks #2 Ranked player. The company is scheduled to release third-quarter results on Oct 29. You can see the complete list of today’s Zacks #1 Rank stocks here

EOG Resources, Inc.EOG has an Earnings ESP of +100.70% and a Zacks Rank of 3. It is scheduled to report third-quarter results on Nov 5.

Oceaneering International, Inc.OII has an Earnings ESP of +33.91% and a Zacks Rank #3. The firm is scheduled to release third-quarter earnings on Oct 28.

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Cabot Oil Gas Corporation (COG) : Free Stock Analysis Report
 
EOG Resources, Inc. (EOG) : Free Stock Analysis Report
 
Oceaneering International, Inc. (OII) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
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Zacks Investment Research