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Hess (HES) to Report Q4 Earnings: What's in the Offing?

Zacks Equity Research

Hess Corporation HES is expected to report fourth-quarter 2018 earnings on Jan 30, before the market opens.

The oil and gas explorer and producer topped the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 230.5%. Let’s see how things are shaping up for this announcement. 

Which Way Are Estimates Treading?

Let’s look at the estimate revision trend in order to get a clear picture of what analysts expect from the company’s earnings release.

The Zacks Consensus Estimate of a loss of 40 cents for the fourth quarter has seen one upward revision and seven downward revisions by firms in the last 60 days. Though most analysts revised estimates downward, the latest earnings estimate reflects an improvement of 60.4% from the year-ago quarter.

The Zacks Consensus Estimate calls for revenues of $1.6 billion for the quarter, up almost 23% from the year-ago quarter.

Hess Corporation Price and EPS Surprise

 

Hess Corporation Price and EPS Surprise | Hess Corporation Quote

Factors to Consider This Quarter

Average worldwide realized oil price (excluding hedging) is likely to decline to $62 a barrel from $69.22 in third-quarter 2018. However, crude price is expected to rise from $57.32 a year ago.

The Zacks Consensus Estimate for the company’s fourth-quarter total production is pegged at 275 thousand barrels of oil equivalent per day (BoE/D), lower than 297 thousand BoE/D in the preceding quarter and 300 thousand BoE/D in the year-ago quarter.

Although higher year-over-year crude prices are likely to be favorable for the upstream energy player, lower production volumes could hurt the stock.

Investors should also know that Hess doesn’t have significant debt exposure, but, as compared to the industry, the stock is more levered.  

Earnings Whispers

Our proven model does not show a beat for Hess this earnings season. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -6.86%. This is because the Most Accurate Estimate is pegged at a loss of 43 cents while the Zacks Consensus Estimate stands at a loss of 40 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hess carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

Conversely, Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into the earnings announcement.  

Stocks to Consider

Here are a couple of stocks worth considering from the energy space with the right combination of elements to outpace earnings estimates this time around.

Ensco plc ESV, a leading offshore contract driller, has an Earnings ESP of +1.64% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Southwestern Energy Company SWN, based in Houston, TX, with both upstream and midstream operations, has an Earnings ESP of +2.32% and holds a Zacks Rank #3.

Fort Worth, TX-based Range Resources Corp RRC, an upstream energy firm, has an Earnings ESP of +4.46% and a Zacks Rank #3.

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