Houston-based independent energy company, Newfield Exploration Company (NFX), is set to report third-quarter 2014 results on Oct 28. Let’s see how things are shaping up prior to the announcement.
In the last quarter, the company’s earnings of 43 cents per share increased 16.2% from 37 cents per share earned in the year-ago quarter. The results, however, missed the Zacks Consensus Estimate of 51 cents.
Factors at Play
During the third quarter, Newfield Exploration divested its Granite Wash assets for $588 million. As a result of the sale, Newfield cut its production guidance for the rest of the year. The company now expects 2014 production at 45.5–47.5 million barrels of oil equivalent (MMBOE), down from prior guidance of 46.5–48.5 MMBOE.
A volatile natural gas price environment could weigh on the performance of the company since most of its reserves are tied to natural gas. Specifically, oil and gas prices have been increasingly volatile in recent years. Due to abundant supply of natural gas – primarily owing to shale revolution – the pricing scenario of natural gas was not healthy during the July-September period. From a peak of about $13.50 per million British thermal units (MMBtu) in 2008, natural gas traded below $4 per MMBtu during the quarter.
Hence, we believe that an unhealthy gas pricing scenario might hamper the company’s to-be reported earnings.
Overall activities of Newfield Exploration during the third quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate declined to 52 cents from 58 cents per share over the last 90 days.
Earnings Whispers
Our proven model does not conclusively show that Newfield Exploration is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: Newfield Exploration has an earnings ESP of -5.77%. This is because the Most Accurate estimate stands at 49 cents while the Zacks Consensus Estimate is pegged higher at 52 cents.
Zacks Rank: Newfield Exploration carries a Zacks Rank #3 (Hold). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.
Delek Logistics Partners, LP (DKL) has Earnings ESP of +5.56% and a Zacks Rank #1 (Strong Buy).
EQT Midstream Partners LP (EQM) has an Earnings ESP of +9.41% and holds a Zacks Rank #2 (Buy).
Boardwalk Pipeline Partners LP (BWP) has an Earnings ESP of +9.09% and holds a Zacks Rank #2.
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