Rice Midstream Partners LP RMP is set to report first-quarter 2015 results on May 7. The midstream energy player − formed by upstream firm Rice Energy Inc. RICE – posted a negative earnings surprise of 35.71%. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Rice Midstream generates cash flow by providing midstream services to its parent company and also to third parties. The partnership’s operating assets include gathering and compression facilities for natural gas.
Over the last few years, there has been an excess supply of the commodity in the U.S. With the advent of hydraulic fracturing (or fracking) – a method used to extract natural gas by blasting underground rock formations with a mixture of water, sand and chemicals – shale gas production has been booming in the country. Coupled with sophisticated horizontal drilling equipment that can drill and extract gas from shale formations, the new technology is being hailed as a breakthrough in U.S. energy supplies, playing a key role in boosting domestic natural gas reserves.
The first quarter, which was not an exception, might also benefit from midstream activities. This is because the more the supply of the commodity, the greater will be the need for storage and compression activities.
It will be interesting to see whether this excess supply translates into better-than-expected profits for the partnership.
Earnings Whispers?
Our proven model does not conclusively show that Rice Midstream 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: Rice Midstream currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a profit of 20 cents per unit.
Zacks Rank: Rice Midstream carries a Zacks Rank #3 (Hold). While this favors our prediction, a 0.00% ESP leaves our forecast inconclusive.
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 for investors to consider, that, according to our model have the right combination of elements to post an earnings beat this quarter:
Rose Rock Midstream, L.P. RRMS has an Earnings ESP of +13.73% and has a Zacks Rank #2 (Buy). The company is expected to release earnings on May 7.
TC PipeLines, LP TCP has an Earnings ESP of +10.67% and holds a Zacks Rank #2. The company is expected to release earnings on May 7.
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