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Ovintiv (OVV) is Set to Beat Earnings in Q1: This is Why

·4 min read

Ovintiv Inc. OVV is set to release first-quarter 2021 results after the closing bell on Wednesday, Apr 28. The current Zacks Consensus Estimate for the to-be-reported quarter is 97 cents per share on revenues of $1.61 billion.

Let’s delve into the factors that might have influenced the independent energy producer’s performance in the March quarter. But it’s worth taking a look at Ovintiv’s previous-quarter performance first.

Highlights of Q4 Earnings & Surprise History

In the last-reported quarter, the Denver, CO-based upstream player beat the consensus mark due to successful cost-control initiatives. Ovintiv had reported adjusted earnings per share of 70 cents that went past the Zacks Consensus Estimate of 63 cents. However, the company’s quarterly revenues of $1.5 billion underperformed the Zacks Consensus Estimate by 9.7%, dragged down by lower production and oil price realizations.

As far as earnings surprises are concerned, Ovintiv beat the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, delivering an earnings surprise of 10.76%, on average. This is depicted in the graph below:

Ovintiv Inc. Price and EPS Surprise

Ovintiv Inc. Price and EPS Surprise
Ovintiv Inc. Price and EPS Surprise

Ovintiv Inc. price-eps-surprise | Ovintiv Inc. Quote

Trend in Estimate Revision

The Zacks Consensus Estimate for the first-quarter bottom line has been revised 14.1% upward in the last seven days. Moreover, the estimated figure indicates an 870% surge year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 39.06% decrease from the year-ago period.

Factors to Consider This Quarter

According to the U.S. Energy Information Administration, in January, February and March of 2020, the average monthly WTI crude price was $57.52, $50.54 and $29.21 per barrel, respectively. In 2021, average prices were $52 in January, $59.04 in February and $62.33 in March, i.e., mostly stronger year over year.

The news is even better on the natural gas front. In Q1 of 2020, U.S. Henry Hub average natural gas prices were $2.02 per MMBtu in January and fell to $1.91 in February before tumbling further to $1.79 in March. Coming to 2021, the fuel was trading at $2.71, $5.35 and $2.62 per MMBtu, in January, February and March, respectively. In other words, natural gas traded higher in all the three months.

This price boost is likely to have buoyed the first-quarter results of oil and gas producer like Ovintiv.

On top of this, it will also benefit from the cost-cutting efforts. Ovintiv has done a commendable job of cutting its expenses and is targeting $1.8 billion of cumulative cash cost savings during the 2021-2024 period compared to 2020. As it is, Ovintiv’s innovation and sophisticated drilling technology has resulted in a significant improvement in well costs, with the company expecting this year’s costs to be at least 20% lower than the 2019 averages. This is expected to have provided a further boost to the company’s first-quarter earnings and cash flows.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Ovintiv this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases 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.

Ovintiv has an Earnings ESP of +7.44% and a Zacks Rank #1.

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

Other Stocks to Consider

Ovintiv is not the only energy company looking up this earnings cycle. Here are some other firms from the space that you may want to consider on the basis of our model:

Chevron Corporation CVX has an Earnings ESP of +6.08% and is Zacks #1 Ranked. The firm is scheduled to release earnings on Apr 30.

Helix Energy Solutions Group, Inc. HLX has an Earnings ESP of +25% and a Zacks Rank #2. The firm is scheduled to release earnings on Apr 26.

BP plc BP has an Earnings ESP of +5.10% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Apr 27.

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Chevron Corporation (CVX) : Free Stock Analysis Report

BP p.l.c. (BP) : Free Stock Analysis Report

Helix Energy Solutions Group, Inc. (HLX) : Free Stock Analysis Report

Ovintiv Inc. (OVV) : Free Stock Analysis Report

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