Texas-based Spectra Energy Corporation SE is slated to report fourth-quarter 2015 earnings on Feb 3, before the market opens.
Last quarter, the company’s earnings of 23 cents per share came in line with the Zacks Consensus Estimate. The bottom line, however, deteriorated from the year-ago quarter earnings of 31 cents.
Factors Likely to Affect Earnings
Major investments in several Canadian projects expose Spectra to fluctuations in currency rates, which may affect the results of its operations.
Moreover, Spectra’s results are vulnerable to fluctuations in natural gas markets. The proposed liquid-rich drilling activities by the company clearly suggest that low natural gas prices have little hope to picking up in the near term.
However, Spectra Energy plans to deploy about $25 billion over the next decade on fee-based gas infrastructure growth projects. The company expects to commission around eight projects through 2016. Further, growth is expected to be achieved by its master limited partnership dropdown strategy. The projects commissioned in 2015 will augment fourth-quarter earnings.
Earnings Whispers
Our proven model does not conclusively show that Spectra Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. 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 currently pegged at -3.03%. The Most Accurate estimate for Spectra Energy stands at 32 cents, while the Zacks Consensus Estimate is pegged higher at 33 cent.
Zacks Rank: Spectra Energy carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of -3.03% makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some other companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:
Scana Corporation SCG has an Earnings ESP of +2.50% and a Zacks Rank #2.
Enbridge Energy Partners, L.P. EEP has an Earnings ESP of +10.53% and a Zacks Rank #3.
Dr. Pepper Snapple Group, Inc. DPS has an Earnings ESP of +2.06% and a Zacks Rank #3.
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