We expect Vanguard Natural Resources LLC (VNR) to beat expectations when it reports third-quarter 2014results on Nov 3, after the closing bell.
Last quarter, the upstream energy player delivered a negative earnings surprise of 22.86%. We note that Vanguard Natural Resources has underperformed the Zacks Consensus Estimate in the preceding four quarters with an average miss of 27.58%.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Vanguard Natural Resources is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +3.70%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: Vanguard Natural Resourcescarries a Zacks Rank #3 (Buy) which, when combined with +3.70% ESP, makes us confident about a positive earnings beat.
Note that stocks with Zacks Ranks #1, 2 or 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.
What's Driving the Better-Than-Expected Earnings?
Houston, TX-based Vanguard Natural Resources is a mid-cap energy player with extensive upstream operations. The partnership is primarily involved in the acquisition, production and development of oil and natural gas resources. Vanguard Natural Resources’ diversified asset bases include both producing and non-producing reserves.
The reserves are situated in the oil-rich areas like Green River Basin in Wyoming, Gulf Coast Basin in Texas, Louisiana and Mississippi, the Arkoma Basin in Arkansas and Oklahoma, the Permian Basin in West Texas and New Mexico and also in the Big Horn Basin in Wyoming and Montana.
Moreover, during the third quarter, Vanguard Natural Resources acquired oil and natural gas resources in North Louisiana and East Texas with huge reserve bases of roughly 150 billion cubic feet equivalent.
The diversified asset bases are expected to help the partnership to earn substantial cash flows for its unitholders during the third quarter.
Other Stocks to Consider
Other stocks in the retail/consumer staples sector with a positive Earnings ESP and favorable Zacks Rank include:
Murphy USA Inc (MUSA), with Earnings ESP of +20.51% and a Zacks Rank #1 (Strong Buy).
Cobalt International Energy Inc. (CIE), with Earnings ESP of +11.11% and a Zacks Rank #1.
Delek Logistics Partners LP (DKL), with Earnings ESP of +5.56% and a Zacks Rank #1.
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