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What's in Store for Chesapeake (CHK) This Earnings Season?

Zacks Equity Research

Chesapeake Energy Corporation CHK is scheduled to release fourth-quarter 2018 results on Feb 27, before the opening bell.

In third-quarter 2018, the company pulled off positive earnings surprise of 18.6%. The figure surpassed the Zacks Consensus Estimate in all the previous four quarters, the average being 20.5%. The company primarily focuses on oil and gas exploration as well as production activities.
 

Chesapeake Energy Corporation Price and EPS Surprise

 

Chesapeake Energy Corporation Price and EPS Surprise | Chesapeake Energy Corporation Quote

 

Let’s see how things are shaping up prior to the announcement.

Which Way are Estimates Treading?

Let’s look at the estimate revision trend to get a clear picture of what analysts are expecting from the company’s upcoming results.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at17 cents, with bullish sentiments from five firms and bearish from none in the past 30 days. The figure reflects year-over-year plunge of 43.3%.

Further, the Zacks Consensus Estimate for revenues is pegged at $1,044 million, showing a decline of 17.1% from the year-ago quarter’s tally.

Factors Likely to Affect Results

Per the Zacks Consensus Estimate, Chesapeake’s production for the current quarter is pegged at 40.75 million barrels of oil equivalent (MMBoe), showing a decline from 50MMBoe in the preceding quarter and 55MMBoe in the year-ago quarter.

The Zacks Consensus Estimate for oil production is pegged at 7.77 million barrels (MMbbls), showing a decline from 8 MMbbls in the year-ago quarter and 9 MMbbls in the last reported quarter.

The Zacks Consensus Estimate for natural gas production is pegged at 178 billion cubic feet (bcf), which indicates a fall from 239 bcf in the year-ago quarter and 215bcf in the July-to-September quarter of 2018.

The Zacks Consensus Estimate for average realized price of oil (including realized gains on derivatives) is pegged at $59 per barrel, showing growth from year-ago quarter’s price of $56 and at par with the last reported quarter.

Per the consensus mark, average realized natural gas price are projected to jump 5.2% from the preceding quarter’s figure and 2.5% from the year-ago quarter’s tally to $2.83 per thousand cubic feet (mcf).

The improvement in commodity prices from the same in the last reported quarter is likely to benefit upstream players like Chesapeake. However, lower oil and gas production are likely to be headwinds.

Earnings Whispers

Our proven model does not show that Chesapeake is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Earnings ESP: Chesapeake has an ESP of -1.29%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Chesapeake carries a Zacks Rank #3. Though a Zacks Rank of #3increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to beat earnings this quarter.

Par Pacific Holdings, Inc. PARR has a Zacks Rank #2 and Earnings ESP of +18.87%. The company is scheduled to report quarterly earnings on Mar 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cheniere Energy, Inc LNG has Earnings ESP of +50.40% and a Zacks Rank #3. The company is scheduled to release quarterly results on Feb 26.

Southwestern Energy Company SWN has Earnings ESP of +6.06% and a Zacks Rank #3. The company is scheduled to release results on Feb 28.

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