Devon Energy Corporation DVN will release third-quarter 2015 financial results after the market closes on Nov 3, 2015. The company reported a positive surprise of 62.50% in the previous quarter. Let’s see how things are shaping up at Devon Energy prior to this announcement.
Factors to Consider
The ongoing softness in oil and gas prices is expected to affect the company’s results yet again. The weak commodity prices persisted in the third quarter and are expected to continue for the balance of 2015 as well. This will severely affect the company’s revenues from oil sales despite strong production.
Devon is on track to achieve production growth 25% to 35% higher than 2014 levels this year. The third quarter will have a role to play in this escalated production process. The rise in output is particularly commendable given the fact that the company lowered its capital expenditure by nearly $350 million from 2014 levels.
To counter weak prices, the company will continue with its cost reduction initiatives. The cost reduction initiatives are expected to benefit Devon in the third quarter, like it did in the second.
Earnings Whispers
Our proven model does not conclusively show that Devon Energy is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here.
Zacks ESP: Devon Energy has an Earnings ESP of -7.02%. This is because the Most Accurate estimate is pegged at 53 cents while the Zacks Consensus Estimate stands at 57 cents.
Zacks Rank: Though Devon Energy’s Zacks Rank #3 increases the predictive power, its -7.02% ESP makes a surprise call unlikely.
We caution against stocks with a Zacks 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 stocks tied to the energy industry worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.
Atlas Resource Partners ARP has an earnings ESP of +144.44% and carries a Zacks Rank #3.
Oasis Petroleum Inc. OAS has an earnings ESP of +14.29% and carries a Zacks Rank #3.
Transocean Ltd. RIG has an earnings ESP of +1.52% and carries a Zacks Rank #3.
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