Offshore drilling equipment maker, Dril-Quip, Inc. (DRQ) is slated to report fourth-quarter 2013 earnings on Mar 3, 2014.
In the last quarter, the company beat the Zacks Consensus Estimate by a margin of 5.66%. Let’s see how things are shaping up for this announcement.
Factors to be Considered this Quarter
Dril-Quip manufactures highly engineered offshore drilling and production equipment for deepwater severe-service applications and harsh environmental conditions. The company designs and manufactures subsea and surface wellheads, subsea and surface production trees, mudline hanger systems, specialty connectors, and associated pipe, drilling and production riser systems, wellhead connectors and diverters, which are used on offshore rig equipment.
Dril-Quip’s results are heavily levered with continued strength in global deepwater drilling markets, especially in South America and the Asia-Pacific region. Given the operators’ long-term outlook on these projects, deepwater drilling and other related services will remain relatively stable through the usual fluctuations in commodity prices.
In the subsea capital equipment area, Dril-Quip’s competitive position is fairly weak in the more lucrative large and complex deepwater segment. Despite its strenuous efforts over the last couple of years, it has made little headway in gaining market share from larger competitors.
Earnings Whispers
Our proven model does not conclusively show that Dril-Quip is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: This is because the Most Accurate estimate stands at a loss of $1.10 while the Zacks Consensus Estimate is higher at $1.13. This leads to an ESP of -2.66% for Dril-Quip.
Zacks Rank: Dril-Quip’s Zacks Rank #3 (Hold) when combined with a -2.66% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies in the oil & gas sector you may want to consider as our model shows that they have the right combination of elements.
Matrix Service Company (MTRX) has earnings ESP of +2.94% and carries a Zacks Rank #1 (Strong Buy).
Patterson-UTI Energy Inc. (PTEN) has earnings ESP of +3.45% and carries a Zacks Rank #1.
Helmerich & Payne Inc. (HP) has earnings ESP of +1.39% and carries a Zacks Rank #1.
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