Woodlands, TX-based, Anadarko Petroleum Corporation (APC) is scheduled to report third-quarter 2014 results before the opening bell on Oct 28. Last quarter, Anadarko Petroleum posted a 1.49% negative earnings surprise. Let’s see how things are shaping up for the third quarter.
Factors Influencing This Quarter
With reserve replacement being a vital factor for survival of Exploration and Production (E&P) companies, Anadarko Petroleum plans to incur capital expenditure in the range of $8.6–$8.8 billion in 2014. These investments will help the company boost its future reserves and aid developmental activity.
However, Anadarko Petroleum derives more than half of its revenues from sales of oil and condensate. The fact that the global supply of crude oil is mounting and demand for the same is expected to dissipate, the economy may continue to witness a declining oil price trend for the upcoming quarters. In spite of Anadarko’s efforts to expand its oil reserves by undertaking large scale oil projects, its top and bottom line will be severely affected by declining oil prices.
Earnings Whispers?
Our proven model does not conclusively show that Anadarko Petroleum will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -3.82%. This is because the Most Accurate Estimate is at $1.26 per share while the Zacks Consensus Estimate is at $1.31 per share.
Zacks Rank: Anadarko Petroleum’s Zacks Rank #5 (Strong Sell) when combined with a -3.82% ESP makes an earnings beat highly unlikely.
We caution against stocks with Zacks Ranks #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 stocks in the independent oil & gas industry you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
Cobalt International Energy, Inc. (CIE) has an earnings ESP of +11.11% and a Zacks Rank #1 (Strong Buy).
WPX Energy, Inc. (WPX) has an earnings ESP of +100.00% and a Zacks Rank #2 (Buy).
Carrizo Oil & Gas Inc. (CRZO) has an earnings ESP of +10.00% and a Zacks Rank #3 (Hold).
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