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What's in Store for Weatherford (WFT) this Earnings Season?
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Weatherford International plc is expected to report third-quarter results on Oct 25, after the closing bell. Last quarter, the company reported a positive earnings surprise of 6.67%. Moreover, Weatherford posted an average positive surprise of 20.32% in the last four quarters. Let’s see how things are shaping up for this quarter.
Factors to Consider
Weatherford is the world's leading oilfield services company. Despite a difficult operating environment owing to oil price weakness, the company’s technological leadership has supported its excellent earnings track record. We expect the company to retain its growth momentum in this quarter as well.
Moreover, oil prices have recovered significantly from the mid-February lows. This has enabled exploration and production companies to engage in more upstream operations. This is evidenced by the substantial increase in the U.S. rig count in recent times. This should boost the company’s earnings in the to-be-reported quarter.
Notably, Baker Hughes Inc. – the company’s data issued since 1944 is as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry – recently declared the rig count for Sep 2016. In the U.S., the total number of rigs increased from the Aug 2016 count owing to a rise in the number of land rigs. This represents the fourth consecutive increase in the U.S. monthly rig count. The increase in drilling operations will translate into more work for oilfield services firms like Weatherford as it helps exploration and production companies in efficiently setting up the oil and gas wells.
However, Weatherford’s debt-heavy balance sheet, its incapability to generate strong free cash flow as well as competition from larger peers are causes for concern.
Earnings Whispers
Our proven model does not conclusively show that Weatherford will beat estimates this quarter. That 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. But 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 -8.00%. This is because the Most Accurate Estimate stands at a loss of 27 cents, while the Zacks Consensus Estimate is pegged at a loss of 25 cents.
Zacks Rank: Weatherford carries Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes a surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Antero Midstream Partners LP (AM - Free Report) has an Earnings ESP of +8.82% and a Zacks Rank #2. The company is likely to release earnings on Oct 26.
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What's in Store for Weatherford (WFT) this Earnings Season?
Weatherford International plc is expected to report third-quarter results on Oct 25, after the closing bell. Last quarter, the company reported a positive earnings surprise of 6.67%. Moreover, Weatherford posted an average positive surprise of 20.32% in the last four quarters. Let’s see how things are shaping up for this quarter.
Factors to Consider
Weatherford is the world's leading oilfield services company. Despite a difficult operating environment owing to oil price weakness, the company’s technological leadership has supported its excellent earnings track record. We expect the company to retain its growth momentum in this quarter as well.
Moreover, oil prices have recovered significantly from the mid-February lows. This has enabled exploration and production companies to engage in more upstream operations. This is evidenced by the substantial increase in the U.S. rig count in recent times. This should boost the company’s earnings in the to-be-reported quarter.
Notably, Baker Hughes Inc. – the company’s data issued since 1944 is as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry – recently declared the rig count for Sep 2016. In the U.S., the total number of rigs increased from the Aug 2016 count owing to a rise in the number of land rigs. This represents the fourth consecutive increase in the U.S. monthly rig count. The increase in drilling operations will translate into more work for oilfield services firms like Weatherford as it helps exploration and production companies in efficiently setting up the oil and gas wells.
However, Weatherford’s debt-heavy balance sheet, its incapability to generate strong free cash flow as well as competition from larger peers are causes for concern.
Earnings Whispers
Our proven model does not conclusively show that Weatherford will beat estimates this quarter. That 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. But 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 -8.00%. This is because the Most Accurate Estimate stands at a loss of 27 cents, while the Zacks Consensus Estimate is pegged at a loss of 25 cents.
Zacks Rank: Weatherford carries Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes a surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
WEATHERFORD INT Price and EPS Surprise
WEATHERFORD INT Price and EPS Surprise | WEATHERFORD INT Quote
Stocks to Consider
Here are some companies that have the right combination of elements to post an earnings beat this quarter:
CONE Midstream Partners LP has an Earnings ESP of +2.7% and a Zacks Rank #1. The partnership is likely to release earnings on Nov 4. You can see the complete list of today’s Zacks #1 Rank stocks here.
Antero Midstream Partners LP (AM - Free Report) has an Earnings ESP of +8.82% and a Zacks Rank #2. The company is likely to release earnings on Oct 26.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>