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Why Is Q4 Earnings Beat Less Likely for ConocoPhillips (COP)?

Zacks Equity Research

ConocoPhillips COP is scheduled to report fourth-quarter 2018 results on Jan 31, before the opening bell.

In the last reported quarter, the upstream energy company posted an earnings surprise of 16.2%. Moreover, ConocoPhillips has an average positive earnings surprise of 12.2% for the last four quarters. Let’s see how things are shaping up prior to the announcement.   

Which Way Are Estimates Treading?

Let’s take a look at the estimate revision trend to get a clear picture of what analysts expect from the company this earnings season.

The Zacks Consensus Estimate for fourth-quarter earnings of 96 cents has witnessed one upward revision and three downward revisions by firms in the past 30 days. Despite negative earnings revisions by most of the firms, the stock will likely see a whopping improvement of about 113.3% from the year-ago quarter’s tally.

Further, the Zacks Consensus Estimate for fourth-quarter revenues is pegged at $10.2 billion, indicating a rise of 16.3% from the year-ago quarter’s figure.

ConocoPhillips Price and EPS Surprise

 

ConocoPhillips Price and EPS Surprise | ConocoPhillips Quote

Factors to Consider

Through fourth-quarter 2018, the West Texas Intermediate (WTI) crude plunged from a multi-year high of $76.40 a barrel in early October to below $45 in late December, per the U.S. Energy Information Administration.  

Since crude is responsible for more than 50% of ConocoPhillips’ total production, the decline in crude price may hurt the company’s upstream businesses.

Earnings Whispers

Our proven model does not show a beat for ConocoPhillips this earnings season. That 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. That is not the case here as you will see below.

Earnings ESP: Earnings ESP for the company is -0.91%. This is because the Most Accurate Estimate is pegged at 95 cents while the Zacks Consensus Estimate stands at 96 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: ConocoPhillips carries a Zacks Rank #5 (Strong Sell). Please note that we caution investors against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Though an earnings beat looks uncertain for ConocoPhillips, here are a few energy firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:

Ensco plc ESV, a leading offshore contract driller, has an Earnings ESP of +1.77% 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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