We expect Nabors Industries Ltd. (NBR), the Hamilton, Bermuda-based onshore contract driller, to beat expectations when it reports second-quarter 2014 financial results after the closing bell on Jul 22, 2014.
Why a Likely Positive Surprise?
Our proven model shows that Nabors is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +4.35%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: Nabors carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Nabors’ Zacks Rank #2 and +4.35% ESP makes us confident of an earnings beat in the coming week.
What is Driving the Better-Than-Expected Earnings?
Nabors remains well positioned with a sound mix of high performance rigs and new rigs working in the key shale plays. Moreover, the demand for new rigs remains much better compared to older commodity units, given their ability to drill the more challenging wells in the emerging resource plays.
Also, an improvement in the energy sector and higher oil prices are driving exploration and production firms to increase capital spending, which in turn could lead to more contracts for oil and gas drilling firms like Nabors.
Additionally, Nabors mentioned during its first-quarter conference call that though it expects normal rig activity in the remainder of the year, better results can be anticipated from the company’s Completion and Production Services segment. While the completion services business should witness a higher operating income owing to increased volumes and lower costs, production services should see improvement amid an increase in rig and trucking hours.
Nabors has consistently performed well in the past few quarters. The positive trend is seen in the trailing four-quarter average positive surprise of 8.05%.
Other Stocks to Consider
Nabors is not the only stock looking up this earnings season. We also see likely earnings beats coming from these three companies in the same sector:
New Source Energy Partners L.P. (NSLP) has Earnings ESP of +33.33% and a Zacks Rank #2.
Pioneer Energy Services Corp. (PES) has Earnings ESP of +33.33% and a Zacks Rank #2.
Helmerich & Payne, Inc. (HP) has Earnings ESP of +0.62% and a Zacks Rank #2.
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