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What's in Store for Encana (ECA) this Earnings Season?
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Oil and gas explorer Encana Corporation is set to report second-quarter 2016 results on Thursday, Jul 21, before the market opens.
Coming to its earnings surprise history, Encana reported an average negative earnings surprise of 18.07% for the last four quarters. Let’s see how things are shaping up for this announcement.
Calgary, Alberta-based Encana is a focused pure-play natural gas exploration and production company. It is one of the largest natural gas companies in North America with the potential for robust growth in production owing to its huge inventory of reserves and a strong resource base.
Encana has been working toward reducing expenses by selling high cost to low profit generating assets. The divestiture of several such assets as part of the company’s portfolio streamlining strategy should bode well.
The proceeds are being used to lower debt burden though much is yet to be achieved. This offers financial flexibility to the company to better handle the current volatile market condition. Also, Encana remains focused on expanding its asset base to generate higher returns. Initiatives like these should have a positive impact on the upcoming earnings.
However, the company’s financials are heavily exposed to commodity prices. Although oil prices rose from the mid-February lows, the pricing scenario was weaker than the comparable quarter last year. The picture was the same for natural gas also. The events might lower revenues for the firm.
Earnings Whispers
Our proven model does not conclusively show that Encana is likely to beat the Zacks Consensus Estimate 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. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Encana has an earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 8 cents.
Zacks Rank: Encana has a Zacks Rank #3, which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
While an earnings beat looks uncertain for Encana, here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:
Anadarko Petroleum Corporation has an Earnings ESP of +13.75% and a Zacks Rank #2. The company is likely to release earnings results on Jul 26.
Legacy Reserves LP has an Earnings ESP of +31.58% and a Zacks Rank #1. The partnership is expected to release earnings results on Aug 3.
Ring Energy Inc. (REI - Free Report) has an Earnings ESP of +33.33% and a Zacks Rank #1. The company is anticipated to release earnings results on Aug 8.
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What's in Store for Encana (ECA) this Earnings Season?
Oil and gas explorer Encana Corporation is set to report second-quarter 2016 results on Thursday, Jul 21, before the market opens.
Coming to its earnings surprise history, Encana reported an average negative earnings surprise of 18.07% for the last four quarters. Let’s see how things are shaping up for this announcement.
ENCANA CORP Price and EPS Surprise
ENCANA CORP Price and EPS Surprise | ENCANA CORP Quote
Factors to Consider this Quarter
Calgary, Alberta-based Encana is a focused pure-play natural gas exploration and production company. It is one of the largest natural gas companies in North America with the potential for robust growth in production owing to its huge inventory of reserves and a strong resource base.
Encana has been working toward reducing expenses by selling high cost to low profit generating assets. The divestiture of several such assets as part of the company’s portfolio streamlining strategy should bode well.
The proceeds are being used to lower debt burden though much is yet to be achieved. This offers financial flexibility to the company to better handle the current volatile market condition. Also, Encana remains focused on expanding its asset base to generate higher returns. Initiatives like these should have a positive impact on the upcoming earnings.
However, the company’s financials are heavily exposed to commodity prices. Although oil prices rose from the mid-February lows, the pricing scenario was weaker than the comparable quarter last year. The picture was the same for natural gas also. The events might lower revenues for the firm.
Earnings Whispers
Our proven model does not conclusively show that Encana is likely to beat the Zacks Consensus Estimate 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. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Encana has an earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 8 cents.
Zacks Rank: Encana has a Zacks Rank #3, which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
While an earnings beat looks uncertain for Encana, here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:
Anadarko Petroleum Corporation has an Earnings ESP of +13.75% and a Zacks Rank #2. The company is likely to release earnings results on Jul 26.
Legacy Reserves LP has an Earnings ESP of +31.58% and a Zacks Rank #1. The partnership is expected to release earnings results on Aug 3.
Ring Energy Inc. (REI - Free Report) has an Earnings ESP of +33.33% and a Zacks Rank #1. The company is anticipated to release earnings results on Aug 8.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>