Oklahoma-based Chesapeake Corporation CHK is expected to report first-quarter 2015 earnings on May 6, before the opening bell.
The company’s earnings history is a mixed bag. Chesapeake surpassed the Zacks Consensus Estimate in two of the trailing four quarters while missed in the other two. In the last reported quarter, the company delivered a negative earnings surprise of 56.00%. Let’s see how things are shaping up for this announcement.
Earnings Whispers
Our proven model shows that Chesapeake is likely to beat earnings because it has the perfect combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +50.00%. This is because the Most Accurate estimate stands at 3 cents, whereas the Zacks Consensus Estimate is pegged lower at 2 cents. This is a meaningful indicator of a likely positive earnings surprise for this company.
Zacks Rank: Chesapeake carries a Zacks Rank #3 (Hold).The stocks with a Zacks Rank #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.
The combination of Chesapeake’s Zacks Rank #3 and +50.00% ESP make us confident of an earnings beat this season.
What Will Drive the Better-than-Expected Earnings?
Chesapeake Energy boasts a leading position among the top unconventional liquids-rich plays and actively manages its asset portfolio through a combination of acquisitions and disposals. Its inventory of unconventional resource potential is probably bigger than any other domestic independent.
For 2015, the company projects production in the range of 235–240 million barrels of oil equivalent per day (MMBoe/d), up 3–5% from 2014, after adjusting for asset sales. Of the total, about 39–40 MMBoe is estimated to be crude oil, 1,035–1,055 Bcf natural gas and 23–24 MMBoe natural gas liquids.
As a result, the company’s overall activities during the January–March period were adequate to win analysts’ confidence. The Zacks Consensus Estimate for the first quarter increased to 2 cents from a penny per share over the last 30 days.
Other Stocks to Consider
While an earnings beat looks certain for Chesapeake, here are some other firms that have the right combination of elements to post an earnings beat:
TC PipeLines LP TCP with an Earnings ESP of +10.67% and a Zacks Rank #2 (Buy).
Callon Petroleum Co. CPE with an Earnings ESP of +50.00% and a Zacks Rank #3.
Spectra Energy Corp. SE has an Earnings ESP of +2.38% and a Zacks Rank #3.
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