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We expect oil & gas exploration and production operator Devon Energy Corp. (DVN - Analyst Report) to surpass expectations when it reports first-quarter results on May 7, 2014.

Why a Likely Positive Surprise?

Our proven model shows that Devon Energy is likely to beat earnings because it has the right combination of key factors.

Positive Zacks ESP: The Earnings ESP (Expected Surprise Prediction), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.79%. This is a meaningful and leading indicator of a likely positive earnings surprise for this company.

Zacks #3 Rank (Hold): The stocks with Zacks Ranks of #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 Devon Energy’s Zacks Rank #3 (Hold) and +0.79% ESP make us confident of an earnings beat on May 7.

What is Driving Better-than-Expected Earnings?

Devon Energy’s strategic transition from a prime natural gas exploration play to crude oil and liquids production has paid off. This is reflected in the positive earnings streak reported in the past four quarters.

With spiraling oil demand and the current shale boom in the U.S. driving liquids production, we believe Devon Energy is poised for another earnings beat in the first quarter.

Contribution from the recently purchased Eagleford assets and sizable production from the Permian Basin will prove to be the major revenue drivers. The liquids-rich Barnett and Anadarko basins are expected to further support the growth momentum. Moreover, favorable U.S. oil and natural gas prices will likely act as a nice tailwind.

Other Stocks to Consider

Devon Energy is not the only company looking up this earnings season. We also see likely earnings beat coming from other oil & gas exploration and production players.

RSP Permian, Inc. (RSPP), Earnings ESP of +11.11% and Zacks Rank #1 (Strong Buy).

Approach Resources, Inc. (AREX - Snapshot Report), Earnings ESP of +4.76% and Zacks Rank #2 (Buy).

Athlon Energy Inc. (ATHL - Snapshot Report), Earnings ESP of +3.70% and Zacks Rank #2 (Buy).

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