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Helmerich & Payne (HP) to Report Q3 Earnings: What's Up?

Zacks Equity Research

Helmerich & Payne, Inc. HP is scheduled to release fiscal third-quarter 2019 results on Jul 25, before the opening bell. The current Zacks Consensus Estimate for the quarter to be reported is a profit of 35 cents per share on revenues of $683 million.

In the last reported quarter, the Tulsa, OK-based contract driller beat the consensus mark by 73.68% on better-than-expected revenues from the U.S. Land business. As far as earnings surprises are concerned, the drilling rig provider has a good record, having met/gone past the Zacks Consensus Estimate thrice in the last four reports. This is depicted in the graph below:

Helmerich & Payne, Inc. Price and EPS Surprise

Helmerich & Payne, Inc. Price and EPS Surprise

Helmerich & Payne, Inc. price-eps-surprise | Helmerich & Payne, Inc. Quote

Investors are keeping their fingers crossed and hoping that the company can surpass earnings estimates this time around as well. However, our model indicates that Helmerich & Payne might not beat on earnings in the to-be-reported quarter.

Which Way Are Top and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for fiscal third-quarter earnings has been downwardly revised by a penny in the past 30 days to 35 cents per share. Nonetheless, it indicates an impressive turnaround from the year-ago reported loss of a penny per share. The Zacks Consensus Estimate for revenues is pegged at $683 million, suggesting an improvement from $649 million reported in the prior-year quarter.

Factors at Play

Oilfield service provider Helmerich & Payne’s U.S. Land segment, which accounts for about 83% of revenues, is likely to post improved y/y results in the to-be-reported quarter.The Zacks Consensus Estimate for operating revenues from its largest segment — U.S. Land — is pegged at $577 million, higher than nearly $537 million recorded in the year-ago quarter.

Helmerich & Payne’s technologically-advanced FlexRigs are much in demand and command strong daily rate margins, which bode well for the segment’s profits in the to-be-reported quarter. The Zacks Consensus Estimate for average rig margin per day at the U.S. Land unit is pegged at $11,390 compared with $8,760 in the prior-year quarter.

While the firm is likely to gain from higher y/y contribution from the U.S Land unit, weaker results from Offshore and International Land segments may limit overall results. 

Fiscal third-quarter revenues for International Land and Offshore segments are estimated at $46.83 million and $36.13 million, respectively, lower than and $63 million $37.67 million, respectively, in the year-ago period. Declining rig margins in International Land and Offshore units remain a concern, and may dent the firm’s overall earnings to some extent.

What Our Model Says

Our proven model does not conclusively predict that Helmerich & Payne will beat the Zacks Consensus Estimate in the quarter to be reported. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

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, is -4.29%.

Zacks Rank: Helmerich & Payne currently has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. But we also need to have a positive Earnings ESP to be confident of a positive surprise.

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

Stocks to Consider

While earnings beat looks uncertain for Helmerich & Payne, here are some companies from the energy space that you may want to consider on the basis of our model, which shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Cenovus Energy CVE has an Earnings ESP of +5.80% and a Zacks Rank #3. The firm is expected to release second-quarter earnings on Jul 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Dutch Shell plc RDS.A has an Earnings ESP of +0.55% and a Zacks Rank #3. The company is anticipated to release second-quarter earnings on Aug 1.

Enbridge Inc. ENB has an Earnings ESP of +8.88% and a Zacks Rank #3. The company is anticipated to release quarterly earnings on Aug 2.

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