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Key Factors to Influence Helmerich & Payne (HP) Q4 Earnings

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Helmerich & Payne, Inc. HP is slated to report fiscal fourth-quarter 2018 results on Nov 16, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a profit of 18 cents on revenues of $683.9 million.

The Zacks Consensus Estimate for the quarter to be reported has been revised upward by 6 cents over the past two months. The consensus estimate reflects a massive turnaround from a loss of 13 cents incurred in the corresponding quarter of the previous year. Further, the Zacks Consensus Estimate for fourth-quarter revenues is also higher than $532 million generated in the year-ago quarter.

Notably, in the preceding three-month period, the company reported net operating loss per share (excluding special items) of a penny, vis a vis the Zacks Consensus Estimate of a profit of 3 cents. Lower-than-expected average rig margin in the offshore segment resulted in the weaker-than-anticipated results.

Nevertheless, the company has a decent earnings surprise history. It has not missed estimates in three of the trailing four quarters.

Helmerich & Payne, Inc. Price and EPS Surprise

 

Helmerich & Payne, Inc. Price and EPS Surprise | Helmerich & Payne, Inc. Quote

Let’s see how things are shaping up for this announcement.

Factors at Play

Helmerich & Payne’s industry-leading drilling fleet, including advanced FlexRig, along with term contracts with well-capitalized oil majors bode well.

The Zacks Consensus Estimate for operating revenues of Helmerich & Payne’s largest segment — U.S. Land — is pegged at $570 million, higher than about $439 million recorded in the year-ago quarter and $537 million in the last reported quarter. Higher rig utilization in the sector is expected to back its results. The segment’s rig utilization is expected at 65%, up from 55% in the year-ago period and 63% in fiscal third-quarter 2018. The Zacks Consensus Estimate for operating income of the U.S. Land segment is pegged at $60 million, reflecting a turnaround from the year-ago quarter’s loss of $4.2 million. The segment’s expected operating income for the to-be-reported quarter also compares favorably with $34.34 million recorded in the year-ago quarter.

The Zacks Consensus Estimate for the to-be-reported quarter’s revenues from Helmerich & Payne’s other two segments — Offshore and International Land drilling — is also pegged at higher levels compared with the prior-year quarter. Fourth-quarter revenues for International Land and Offshore segments are estimated at $65 million and $37.57 million, respectively, compared with $55 million and $32.51 million generated in the year-ago period. In fact, the Zacks Consensus Estimate for operating income of both international and offshore operations is pegged higher than the year-ago quarter.

However, declining rig margin in International Land remains a concern and may dent its overall earnings. For the quarter to be reported, the Zacks Consensus Estimate for average rig margin at the International Land unit is pegged at $9,080 compared with $12,390 in the prior-year quarter.

While we are optimistic about the company’s overall results, tepid margins from International Land drilling segments along with pipeline constraints in the Permian region may limit earnings to some extent.

Earnings Whispers

Our proven model does not show that Helmerich & Payne is likely to beat earnings estimates in the quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #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 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at 18 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Helmerich & Payne currently has a Zacks Rank #2. Though a Zacks Rank #2 increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult. Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks With Favorable Combination

Here are some companies from other sectors, which, according to our model, have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Bitauto Holdings Limited BITA has an Earnings ESP of +12.36% and a Zacks Rank #2. The company is expected to report third-quarter results on Nov 19. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL has an Earnings ESP of +2.38% and carries a Zacks Rank #2. The company is expected to report third-quarter earnings on Nov 20.

Ross Stores ROST has an Earnings ESP of +3.45% and a Zacks Rank of 2. The company is expected to report third-quarter earnings on Nov 20.

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