Independent exploration and production (E&P) company, Canadian Natural Resources Limited CNQ is set to report fourth-quarter 2015 results on Mar 3, before the opening bell.
Last quarter, Canadian Natural posted a positive earnings surprise of 27.27%. Moreover, the company posted a positive average surprise of 20.60% for the last four quarters. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
The lion’s share of the company’s production comprises oil. So we can say that crude price is the main influence on the business of this E&P player.
During the entire fourth quarter of 2015, we saw weakness in crude price. This was owing to abundant supply of the commodity in the face of lackluster global demand. Since there is a positive correlation between oil price and the company’s earnings we expect soft commodity pricing to take a toll on Canadian Natural’s earnings.
However, during the prior-quarter earnings announcement, Canadian Natural projected fourth-quarter liquid production of 562,000–588,000 barrels per day (Bbl/d). The top end of the range is higher than 573,135 Bbl/d output during third-quarter 2015. Hence, although oil price was not in favor, let’s see weather higher production will help the company to beat on earnings.
Earnings Whispers?
Our proven model does not conclusively show that Canadian Natural is likely to beat earnings estimates 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: The company’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 5 cents.
Zacks Rank: Canadian Natural carries a Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when it is seeing negative estimate revisions.
Stocks to Consider
Here are some players for investors to consider that, according to our model, have the right combination of elements to post an earnings beat this quarter:
Vanguard Natural Resources LLC VNR with an Earnings ESP of +53.33% and a Zacks Rank #3. The company is scheduled to release earnings on Mar 4.
Clayton Williams Energy Inc. CWEI with an Earnings ESP of +8.39% and a Zacks Rank #3. The company is scheduled to release earnings on Mar 10.
Superior Drilling Products, Inc. SDPI with an Earnings ESP of + 66.67% and a Zacks Rank #2 (Buy). The company is expected to release earnings on Mar 11.
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