U.S. Markets closed

Will Gas-Weighted Range Resources (RRC) Miss Q2 Earnings?

Nilanjan Choudhury

Oil and gas producer Range Resources Corp. (RRC) is set to release its second quarter 2014 results after the closing bell on Monday, Jul 28.

In the preceding three-month period, Range Resources delivered a positive 5.26% earnings surprise – the third outperformance in the last 4 quarters – buoyed by a rise in volumes. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Range Resources’ diversified asset portfolio is spread between low-risk/long reserve-life Appalachian assets and large-volume/rapid-payout Gulf Coast properties. The company has an impressive inventory in the Marcellus Shale, one of the prominent emerging shale plays in the U.S. lower 48 states.

Last year, Marcellus Shale well results continued to show improvement from both a production and a cost perspective and output averaged 968 million cubic feet equivalent per day (MMcfe/d), up 37% from the prior year.

For the second quarter of 2014, the company targets production growth between 1,065 and 1,075 MMcfe/d, of which natural gas is likely to comprise as much as 65–70%. As such Range Resources remains susceptible to volatile natural gas prices, which could hurt the company’s volumes and margins.

Earnings Whispers?

Our proven model does not conclusively show that Range Resources is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here, as elaborated below.

Zacks ESP: Range Resources’ earnings ESP is 0.00%, as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 37 cents.

Zacks Rank: Range Resources carries a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

While earnings beat looks uncertain for Range Resources, 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 an earnings beat this quarter:

Mid-Con Energy Partners L.P. (MCEP) has an Earnings ESP of +8.89% and holds a Zacks Rank #1 (Strong Buy).

Newfield Exploration Co. (NFX) has an Earnings ESP of +2.00% and holds a Zacks Rank #1.

Whiting Petroleum Corp. (WLL) has an Earnings ESP of +3.18% and holds a Zacks Rank #2 (Buy).

Read the Full Research Report on RRC
Read the Full Research Report on NFX
Read the Full Research Report on WLL
Read the Full Research Report on MCEP

Zacks Investment Research