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The largest publicly traded integrated oil and gas company ExxonMobil Corporation (XOM - Analyst Report) is set to release its second quarter 2014 results on Jul 31.

In the preceding three-month period, Range Resources delivered a positive earnings surprise of 11.70% – the third outperformance in the last 4 quarters – buoyed by steeper natural gas prices. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

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

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.52%. This is a meaningful and leading indicator of a likely positive earnings surprise for this company.

Zacks Rank: ExxonMobil carries a Zacks Rank #2 (Buy). 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 ExxonMobil’s Zacks Rank #2 (Buy) and +0.52% ESP make us confident of an earnings beat on Jul 31.

What is Driving Better-than-Expected Earnings?

We believe that ExxonMobil is the world’s best-run integrated oil company, based on its track record of superior return on capital employed. ExxonMobil’s strength is in its balanced operations, strong financial flexibility and steady improvement in efficiency and cost control. The company’s efforts to build an unconventional resource portfolio both in North America and overseas are aimed at increasing production through wider exposure to large energy resources with a long reserve life and low field declines.

The company boasts diversified operations across the world with several new projects coming online through 2013–14. This we feel would lead to higher throughput for the Downstream segment. However refining margins were a grey area for the company in the second quarter. Our apprehension stems from volatile crack spreads and narrowed crude oil differentials in recent times. The saving grace we feel would come from the Upstream segment through higher price realizations.

Other Stocks to Consider

While earnings beat looks uncertain for ExxonMobil, here are some energy firms you may want to consider on the basis of our model, which shows that these have the right combination of elements to post an earnings beat this quarter:

Mid-Con Energy Partners L.P. (MCEP - Snapshot Report) has an Earnings ESP of +8.89% and holds a Zacks Rank #1 (Strong Buy).

Newfield Exploration Co. (NFX - Analyst Report) has an Earnings ESP of +1.96% and holds a Zacks Rank #1.

Whiting Petroleum Corp. (WLL - Snapshot Report) has an Earnings ESP of +3.18% and holds a Zacks Rank #2.
 

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