Murphy Oil Corporation (MUR) will release its fourth-quarter 2014 financial results on Jan 28, 2015. In the previous quarter, the oil and gas company reported a positive earnings surprise of 13.86%. On an average, Murphy Oil has posted an 11.67% negative surprise in the last four quarters. Let’s see how things are turning out for the fourth quarter.
Factors to Consider This Quarter
The prevailing downward movement of crude oil prices remains our major concern as Murphy Oil generates a considerable part of its revenues from the sale of crude oil. The oil supply glut, which resulted from higher production in the U.S., continues to drag down global oil prices. This factor is expected to impact the company’s future results negatively. In addition, weakened natural gas prices might hamper Murphy Oil’s growth trajectory, going forward.
Based on the U.S. National Oceanic and Atmospheric Administration’s reports, the Energy Information Administration projected a decline in the utilization of heating oil, natural gas, electricity and propane this winter on milder temperatures. Lower household expenditure on these commodities will affect Murphy Oil’s revenues adversely.
Earnings Whispers?
Our proven model does not conclusively show that Murphy Oil 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 -3.85%. This is because the Most Accurate estimate is pegged at 25 cents while the Zacks Consensus Estimate stands slightly higher at 26 cents.
Zacks Rank: Murphy Oil’s Zacks Rank #4 (Sell), which when combined with a negative ESP, makes an earnings beat unlikely.
We caution against stocks with Zacks Ranks #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 stocks in the same sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
Spectra Energy Partners, LP (SEP) has an earnings ESP of +2.94% and a Zacks Rank #1 (Strong Buy).
Tesoro Corporation (TSO) has an earnings ESP of +1.41% and a Zacks Rank #2 (Buy).
Valero Energy Corporation (VLO) has an earnings ESP of +12.82% and a Zacks Rank #3 (Hold).
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