ConocoPhillips (COP), an independent exploration and production company, is scheduled to report fourth-quarter 2014 results before the opening bell on Jan 29. Last quarter, ConocoPhillips posted a 10.26% positive earnings surprise. Let’s see how things are molding for the quarter to be reported.
Factors to Consider This Quarter
ConocoPhillips' exploration initiatives toward liquids-rich plays are losing momentum through the Eagle Ford, Bakken and North Barnett shale plays. This shift toward liquid-linked assets, however, witnessed troubled waters in the October-December period owing to high crude stockpiles, as imports increased and refiners scaled down their utilization rates.
The price of West Texas Intermediate (WTI) crude had slumped to the darker side of $45 per barrel and is expected to remain so in the near term. The southward march in crude prices dragged down energy shares. As a result, the quarter witnessed volatile prices and the company expects daily production in the band of 1.545–1.575 million barrels of oil equivalent (MMBOE).
Earnings Whispers
Our proven model does not conclusively show that ConocoPhillips will beat on earnings in the fourth 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 -6.45%. This is because the Most Accurate estimate is at 58 cents per share while the Zacks Consensus Estimate is pegged higher at 62 cents per share.
Zacks Rank: ConocoPhillips has a Zacks Rank #5 (Sell). Not only do we caution investors against Sell-rated (Rank #4 or 5) stocks going into the earnings announcement, a negative ESP also complicates our surprise prediction.
Stocks to Consider
Here are some stocks in the same 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:
Spectra Energy Partner LP (SEP) has an Earnings ESP of +2.94% and a Zacks Rank #1. The partnership is expected to release earnings on Feb 4.
Valero Energy Partners LP (VLP) has an Earnings ESP of +3.33% and a Zacks Rank #2. The company is slated to release earnings on Feb 5.
Tesoro Corporation (TSO) has an Earnings ESP of +1.40% and a Zacks Rank #2. The company is likely to release earnings on Feb 11.
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