Chinese energy giant PetroChina Co Ltd PTR is expected to release its full-year 2014 financial results on Mar 19, 2015.
In the third quarter of 2014, the integrated energy company had delivered a negative earnings surprise of 18.45%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Among the upstream, midstream and downstream businesses, PetroChina generates the majority of its earnings from exploration and production activities. Let’s see how crude traded last year as oil comprises almost 66%of the company’s output.
From June 2014 we saw oil price losing its momentum and starting to fall. In July, West Texas Intermediate (WTI) crude price fell below the $100 per barrel threshold level and started witnessing a free fall. By the end of December, oil fell to the $53.45 per barrel level – nearly 50% below the highest price level attained last year. The decline was due to abundant supply of the commodity amid lacklustre global demand.
Overall, we can say that the upstream business environment was pathetic.
We are also concerned as the Chinese government has capped the prices of refined-products (particularly gasoline and diesel) to control inflation. These price regulations have made it impossible for PetroChina to pass on its significant operating cost to consumers.
Earnings Whispers?
Our proven model does not conclusively show that PetroChina is likely to beat the Zacks Consensus Estimate this year. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This leads to an ESP of -7.52% for PetroChina as the Most Accurate estimate stands at $8.98 per ADR while the Zacks Consensus Estimate is pegged higher at $9.71.
Zacks Rank: PetroChina has a Zacks Rank #5 (Strong Sell). As such, we caution investors against Sell-rated stocks (#4 and 5) going into the earnings announcement. A negative ESP also suggests an earnings miss by the company.
Performance of Other Players
Energy players that surpassed the Zacks Consensus Estimate during the fourth quarter include Halliburton Company HAL, EQT Midstream Partners, LP EQM and Cheniere Energy Partners LP CQP.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment