We expect independent natural gas operator Southwestern Energy Co. SWN to beat expectations when it reports first-quarter 2015 results after the close of the trading session on Thursday, Apr 23.
Why a Likely Positive Surprise?
Our proven model shows that Southwestern Energy is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +4.76%. This is very meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: Southwestern Energy a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Southwestern Energy’s Zacks Rank #3 and +4.76% ESP makes us confident of an earnings beat this season.
What is Driving the Better-than-Expected Earnings?
Southwestern Energy is one of the largest producers of natural gas in the U.S. It has a diversified reserve base in multiple U.S. basins and is focused on investments in high-return areas such as the Fayetteville, Appalachia and New Ventures.
The company is expected to continue production growth amid higher contribution from acquisitions and new drilling ventures. The company expects a 23% volume growth this year.
Southwestern’s recent asset sale announcements – conventional oil and gas assets located in East Texas and the Arkoma Basin and gathering assets in Pennsylvania – are expected to provide the much needed liquidity. This should also help the company lower its debt levels.
Stocks to Consider
Here are some companies from the same space which, according to our model, have the right combination of elements to post an earnings beat this quarter.
Suncor Energy Inc. SU has an Earnings ESP of +400.00% and a Zacks Rank #2 (Buy). The company is expected to release earnings on Apr 29.
Whiting Petroleum Corp. WLL has an Earnings ESP of +6.90% and a Zacks Rank #2. The company is slated to release earnings on Apr 29.
Cenovus Energy Inc. CVE has an Earnings ESP of +58.82% and a Zacks Rank #2. The company is slated to release earnings on Apr 29.
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