U.S. markets open in 8 hours 34 minutes
  • S&P Futures

    3,838.25
    -4.25 (-0.11%)
     
  • Dow Futures

    30,768.00
    -74.00 (-0.24%)
     
  • Nasdaq Futures

    13,559.00
    +73.50 (+0.55%)
     
  • Russell 2000 Futures

    2,133.60
    -12.20 (-0.57%)
     
  • Crude Oil

    52.97
    +0.36 (+0.68%)
     
  • Gold

    1,848.20
    -2.70 (-0.15%)
     
  • Silver

    25.45
    -0.09 (-0.34%)
     
  • EUR/USD

    1.2167
    -0.0001 (-0.01%)
     
  • 10-Yr Bond

    1.0400
    0.0000 (0.00%)
     
  • Vix

    23.02
    -0.17 (-0.73%)
     
  • GBP/USD

    1.3742
    +0.0010 (+0.07%)
     
  • USD/JPY

    103.6760
    +0.0490 (+0.05%)
     
  • BTC-USD

    31,555.72
    -516.54 (-1.61%)
     
  • CMC Crypto 200

    633.77
    -5.37 (-0.84%)
     
  • FTSE 100

    6,654.01
    +15.16 (+0.23%)
     
  • Nikkei 225

    28,615.90
    +69.72 (+0.24%)
     

Here's How Laredo Petroleum (LPI) Looks Ahead of Q3 Earnings

Zacks Equity Research
·4 min read

Laredo Petroleum, Inc. LPI is set to release third-quarter 2020 results after the closing bell on Wednesday, Nov 4. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $3.32 per share on revenues of $176.6 million.

Let’s delve into the factors that might have influenced the oil and gas producer’s performance in the September quarter. But it’s worth taking a look at Magellan Midstream’s previous-quarter performance first.

Highlights of Q2 Earnings & Surprise History

In the last-reported quarter, the Tulsa, OK-based upstream operator beat the consensus mark due to strong production. Laredo Petroleum had reported adjusted net income per share of $2.43, comfortably ahead of the Zacks Consensus Estimate of $1.52. However, the Permian Basin-focused company’s quarterly revenues of $110.6 million had come in below the Zacks Consensus Estimate of $185 million on lower oil price realizations.

As far as earnings surprises are concerned, Laredo Petroleum beat the Zacks Consensus Estimate in three of the last four quarters and missed in the other two, delivering an earnings surprise of 12.47%, on average. This is depicted in the graph below:

 

Laredo Petroleum, Inc. Price and EPS Surprise

Laredo Petroleum, Inc. Price and EPS Surprise
Laredo Petroleum, Inc. Price and EPS Surprise

Laredo Petroleum, Inc. price-eps-surprise | Laredo Petroleum, Inc. Quote

 

Trend in Estimate Revision

The Zacks Consensus Estimate for the third-quarter bottom line remained the same in the last seven days. However, the estimated figure indicates 21% deterioration year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests an 8.8% decline from the year-ago period.

Factors to Consider This Quarter

In the previous quarter, Laredo Petroleum experienced the wrath of declining oil prices, a trend that is most likely to have continued in the third quarter because of the continuation of the weak operating environment. Consequently, the Zacks Consensus Estimate for the third-quarter average sales price for oil (including the company’s substantial hedges) is pegged at $36.69 per barrel, indicating a decrease of 34.5% year over year. The year-over-year fall in realizations has most likely impacted Laredo Petroleum’s upstream earnings and cash flows, as 65% of its production is in the form of liquids. As it is, the company’s production is expected to decline sequentially with lower activity in the face of reduced realizations.

However, the company’s cost-reduction efforts have been encouraging. For 2020, Laredo Petroleum has trimmed its capital expenditure budget by almost 30% year over year to $340-$350 million after reckoning the ongoing crash in commodity prices. Moreover, for the second quarter, Laredo Petroleum was able to bring down its controllable cash costs to a peer-leading $3.42 per barrels of oil equivalent, while lowering operating costs by 16% from the year-ago period. The trend most likely continued in the third quarter of 2020 because of Laredo Petroleum’s operational efficiency and ability to reduce well cost. This, in turn, is expected to have lifted the company’s earnings and cash flows.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Laredo Petroleum is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

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, for this company is +3.33%.

Zacks Rank: Laredo Petroleum has a Zacks Rank #4 (Sell).

Stocks to Consider

While an earnings beat looks uncertain for Laredo Petroleum, here are some firms from the energy  space that you may want to consider on the basis of our model:

DCP Midstream, LP DCP has an Earnings ESP of +4.77% and a Zacks Rank #1. The firm is scheduled to release earnings on Nov 4.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sunoco LP SUN has an Earnings ESP of +1% and is Zacks #1 Ranked. The firm is scheduled to release earnings on Nov 4.

Comstock Resources, Inc. CRK has an Earnings ESP of +11.11% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Nov 4.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Comstock Resources, Inc. (CRK) : Free Stock Analysis Report
 
Sunoco LP (SUN) : Free Stock Analysis Report
 
Laredo Petroleum, Inc. (LPI) : Free Stock Analysis Report
 
DCP Midstream Partners, LP (DCP) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research