Tesoro Corporation TSO is set to report second-quarter 2015 results on Aug 5, after the closing bell.
Last quarter, Tesoro posted a negative earnings surprise of 19.01%. However, for the last four quarters, the company’s average positive surprise was 3.72%.
Factors to Consider this Quarter
Tesoro − one the largest independent oil refiners in the U.S. − generates earnings mostly by selling refined petroleum products that it produces by processing raw crude. Hence, the company’s business is negatively correlated with crude price, which makes up the input cost.
Although the commodity price rebounded from the prior quarter, the pricing environment of crude was weak during the entire second quarter. This weakness was owing to plentiful supply of the commodity and gloomy global demand.
As a result, we can say that the business scenario during the entire quarter was favorable for the company as the input cost was significantly down. On top of this positive, we should also note that the company expects operating earnings of $800 million for the quarter, much higher than $518 million in first-quarter 2015.
Let’s see whether the favorable fundamentals translate into an earnings beat in the second quarter.
Earnings Whispers
Our proven model does not conclusively show that Tesoro is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $4.04, resulting in an Earnings ESP of 0.00%.
Zacks Rank. Tesoro carries a Zacks Rank #2 (Buy) which increases the predictive power of ESP. But a 0.00% ESP makes our surprise prediction difficult.
We caution against stocks with a Zack Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies for investors to consider as these have the right combination of elements to post an earnings beat this quarter:
CONE Midstream Partners LP CNNX has an Earnings ESP of +12.50% and a Zacks Rank #1 (Strong Buy). The partnership is slated to release earnings on Aug 5.
Seadrill Partners LLC SDLP has an Earnings ESP of +12.28% and a Zacks Rank #1. The partnership is slated to release earnings on Aug 26.
Calumet Specialty Products Partners LP CLMT has Earnings ESP of +15.79% and a Zacks Rank #2. The partnership is likely to release earnings on Aug 5.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment