Devon Energy Corp. DVN is scheduled to report second-quarter 2015 results after the market closes on Aug 4, 2015. Last quarter, the company posted a negative earnings surprise of 15.38%. Let’s see how things are shaping up for the second quarter.
Factors to Note
Crude oil prices did not improve significantly during the second quarter, a fact that is not expected to help Devon Energy’s prospects. However, its cost saving initiatives would lend some support in this weak commodity price environment.
Strong production nonetheless from the liquid rich areas like the Eagle Ford Shale and Delaware Basin is expected to boost output in the second quarter as was the case in the first.
Earnings Whispers?
Our proven model does not conclusively show that Devon Energy will beat earnings this 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: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -2.08%. This is because the Most Accurate estimate is 47 cents and the Zacks Consensus Estimate is currently pegged at 48 cents.
Zacks Rank: Though Devon Energy’s Zacks Rank #3 increases the predictive power, its -2.08% ESP makes an earnings beat unlikely.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks in the same space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
Cobalt International Energy, Inc. CIE has an earnings ESP of +13.64% and carries a Zacks Rank #2.
Warren Resources Inc. WRES has an earnings ESP of +9.09% and carries a Zacks Rank #2.
Apache Corp. APA has an earnings ESP of +15.63% and a Zacks Rank #3.
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