We expect Canadian Natural Resources Limited CNQ to beat expectations when it reports second-quarter 2018 results on Thursday, Aug 2, before market opens. The current Zacks Consensus Estimate for the quarter under review is a profit of 57 cents on revenues of $4,280 million.
In the preceding three-month period, the independent oil and gas producer missed the consensus mark by 1.8% on higher-than-expected operating expenditure.
As far as earnings surprises are concerned, the Calgary, Alberta-based upstream operator is on a slippery slope, having gone past the Zacks Consensus Estimate just once the last four reports. This is depicted in the graph below:
Canadian Natural Resources Limited Price and EPS Surprise
Canadian Natural Resources Limited Price and EPS Surprise | Canadian Natural Resources Limited Quote
Investors are keeping their fingers crossed and hoping that Canadian Natural can put an end to its dismal surprise trend. Thankfully, our model indicates that the company might beat on earnings this time around.
Let’s delve deep to find out the factors likely to impact Canadian Natural’s second-quarter results.
Why a Likely Positive Surprise?
Our proven model shows that Canadian Natural is likely to beat earnings in the to-be-reported quarter as it has the right combination of two key ingredients. 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.75%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Canadian Natural is #1 Ranked which, when combined with a positive ESP, makes us confident of earnings beat.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
What is Driving the Better-Than-Expected Earnings?
We believe that the improving oil price environment amid a favorable shift in Canadian Natural’s product mix toward the commodity bode well as approximately 76% of the company’s volumes comprise of liquids.
Canadian Natural is engaged in the acquisition, development and exploitation of crude oil and natural gas properties. The company has a strong and diverse production base with long-life and low decline rate assets. In the last quarter, the company witnessed a 28% year-over-year increase in production. With Canadian Natural’s solid assets and strong project execution, we expect this trend to continue in the second quarter as well.
Moreover, the upstream player is poised to benefit from higher crude price realizations. Benchmark crude oil prices have risen sharply over the past year amid continued declines in inventories and an improving supply-demand narrative.
Other Stocks to Consider
Canadian Natural is not the only energy firm looking up this earnings season. Here are some companies from the space which, according to our model, also have the right combination of elements to post earnings beat this quarter
Penn Virginia Corporation PVAC has an Earnings ESP of +6.72% and a Zacks Rank #1. The company is anticipated to release earnings on Aug 7. You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy Oil Corporation MUR has an Earnings ESP of +5.99% and a Zacks Rank #2. The company is anticipated to release earnings on Aug 8.
Sanchez Energy Corporation SN has an Earnings ESP of +3.41% and a Zacks Rank #3. The firm is expected to release earnings on Aug 7.
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