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Things to Note Ahead of Helmerich & Payne's (HP) Q2 Earnings

Zacks Equity Research
·5 min read

Helmerich & Payne, Inc. HP is set to release fiscal second-quarter 2020 results after the closing bell on Thursday, Apr 30. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 7 cents per share on revenues of $593.5 million.

Let’s delve into the factors that might have influenced the oil and gas contract driller’s performance in the March quarter. But it’s worth taking a look at Helmerich & Payne’s previous quarter's performance first.

Highlights of Fiscal Q1 Earnings & Surprise History

In the last reported quarter, the Tulsa, OK-based drilling rig provider beat the consensus mark on higher offshore rig margin and increases in revenues from the H&P Technologies segment. Helmerich & Payne reported adjusted earnings per share of 13 cents that surpassed the Zacks Consensus Estimate by 85.7%. Meanwhile, the company’s quarterly revenues of $614.7 million topped the Zacks Consensus Estimate of $609 million.

As far as earnings surprises are concerned, Helmerich & Payne, which recently cut its fiscal 2020 capital program and dividend to survive the crude mayhem, is on an excellent footing, having gone past the Zacks Consensus Estimate in each of the last four reports, with the average positive surprise being 59.1%. 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 and EPS Surprise

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

Trend in Estimate Revision

The Zacks Consensus Estimate for fiscal second-quarter 2020 earnings per share remained same over the last seven days. However, the estimated figure indicates an 89.4% drop from the year-ago reported earnings. The Zacks Consensus Estimate for revenues also suggests a 17.7% decrease from the prior-year reported figure of $720.9 million.

Factors to Consider This Quarter

The slump in oil prices has pushed drilling activity lower by introducing tremendous uncertainty around the exploration and production (E&P) spending outlook. As supplier of technology, solution and parts to the E&P sector, the sentiment toward the oil services firms (like Helmerich & Payne) is rather pessimistic ahead of their reports.

In particular, economic impact from the coronavirus outbreak and the historic oil price plunge is likely to have negatively impacted Helmerich & Payne’s ‘U.S. Land’ segment,  which represents nearly 90% of its total fleet and makes up more than 80% of the oilfield service provider’s revenues. The company’s sales from the segment are pegged at $509 million, compared with $622 million in the corresponding period of 2019. Meanwhile, the Zacks Consensus Estimate for operating income from the U.S. Land unit is pegged at $89 million, indicating a decline from $106 million in the year-ago quarter.

However, on a somewhat positive note, Helmerich & Payne’s bottom line is expected to have reflected the impact of strict cost control in the to-be-reported results. Helmerich & Payne’s operating costs and expenses in the fiscal first quarter decreased 15% to $583.3 million. The falling cost trajectory is likely to have continued in the fiscal second quarter due to the company’s substantially lower drilling expenses for its technologically advanced rig fleet.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Helmerich & Payne is likely to beat estimates in the March 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 stands at -5.65%.

Zacks Rank: Helmerich & Payne has a Zacks Rank of 3.

Stocks to Consider

While earnings beat looks uncertain for Helmerich & Payne, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this season:

Southwestern Energy Company SWN has an Earnings ESP of +3.90% and a Zacks Rank #2. The firm is scheduled to release earnings on Apr 30.

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

Transocean Ltd. RIG has an Earnings ESP of +0.56% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Apr 29.

Concho Resources Inc. CXO has an Earnings ESP of +3.48% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Apr 30.

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Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Helmerich & Payne, Inc. (HP) : Free Stock Analysis Report
 
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Concho Resources Inc. (CXO) : Free Stock Analysis Report
 
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