Woodlands, TX-based, Anadarko Petroleum Corporation (APC) is scheduled to report fourth-quarter 2014 results on Feb 2. Last quarter, Anadarko Petroleum posted a negative earnings surprise of 10.77%. Let’s see how things are shaping up for the fourth quarter.
Factors Influencing This Quarter
Anadarko Petroleum is one of the largest independent oil and natural gas exploration and production (E&P) companies in the world. The company is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and natural gas liquids (NGLs).
Anadarko Petroleum derives more than half of its revenues from sales of oil and condensate. The global supply of crude oil is mounting while demand for the same is on a decline leading to a free fall in oil prices.
Since Jun 2014, oil prices have plunged more than 40% and still show signs of weakening. Adding to the severity, the U.S. Energy Information Administration forecasts a decline in oil and natural gas used for heating purposes owing to a much milder start to winter.
In spite of Anadarko’s efforts to expand its oil reserves by undertaking large scale drilling projects, its top and bottom line will be under pressure given the headwinds this quarter.
Earnings Whispers?
Our proven model does not conclusively show that Anadarko Petroleum 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: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -3.66%. This is because the Most Accurate Estimate is at 79 cents per share while the Zacks Consensus Estimate is at 82 cents.
Zacks Rank: Anadarko Petroleum’s Zacks Rank #5 (Strong Sell) when combined with a -3.66% ESP makes an earnings beat highly unlikely.
We particularly 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 oil & gas industry you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
Tesoro Corporation (TSO) has an earnings ESP of +1.40% and a Zacks Rank #2.
Bill Barrett Corp. (BBG) has an earnings ESP of +66.67% and a Zacks Rank #3.
Enbridge Energy Management LLC (EEQ) has an earnings ESP of +25.81% and a Zacks Rank #3.
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