Helmerich & Payne, Inc. (HP), the oil and gas drilling contractor, is set to release fourth-quarter fiscal 2014 financial results before the opening bell on Thursday, Nov 13.
The company has beaten the Zacks Consensus Estimate in three of the trailing four quarters with an average positive surprise of 4.32%. However, in the last reported quarter, it missed the Zacks Consensus Estimate by a penny. Let’s see how things are shaping up for this announcement.
Factors to Consider in the Past Quarter
Crude oil prices have declined substantially over the past few months, hitting multi-year lows. This is a cause of concern for the likes of Helmerich & Payne as it could reduce contract flows and earnings. Several drilling companies like Nabors Industries Ltd. (NBR) and Diamond Offshore Drilling, Inc. (DO) have, however, withstood the price slump and reported strong numbers.
Helmerich & Payne’s offshore operations are likely to witness a decline, given the oversupply in the rig market and lower prices. However, the company’s U.S. land operations should somewhat offset these negatives owing to increased U.S. activity and better dayrates.
Furthermore, Helmerich & Payne’s strong contract drilling backlog, which now stands at around $4.8 billion, not only reflects steady demand from its customers but also offers long-term earnings and cash flow visibility.
Earnings Whispers?
Our proven model does not conclusively show that Helmerich & Payne is likely to beat the Zacks Consensus Estimate this quarter. 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, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently -0.60% for Helmerich & Payne.
Zacks Rank: Helmerich & Payne’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.
Promising Stocks
Here is one company that can be considered as it has the right combination of elements to post an earnings beat this quarter.
SandRidge Mississippian Trust I (SDT) has an Earnings ESP of +38.89% and a Zacks Rank #1 (Strong Buy).
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