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Hess Corp (HES): What's in Store this Earnings Season?
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Hess Corporation (HES - Free Report) , a global exploration and production (E&P) company that develops, produces, purchases, transports and sells crude oil and natural gas, is expected to report third-quarter 2016 earnings on Oct 26, before the market opens.
In the last quarter, the company reported loss from continuing operations of $1.11 per share, narrower than the Zacks Consensus Estimate of a loss of $1.26. However, the loss widened substantially from the year-ago quarter loss of 52 cents per share. The underperformance was mainly attributable to the plunge in oil and gas prices.
Let’s see how things are shaping up for this announcement.
Hess has transformed to a predominantly E&P entity, thereby shifting its growth approach from high-impact exploration to low-risk unconventionals, and a smaller, more focused exploration portfolio. The company divested its downstream businesses, including energy marketing, terminals, retail marketing and refining operations. In view of the global economic slowdown and new refining capacity entering the world market, the aforesaid decisions will help enhance Hess’ shareholder value and boost its earnings.
Hess’ priority remains investment in future growth with a balanced approach between unconventional, exploitation and exploration. Recently, the company divested several assets and is in the process of shedding other properties. The amount raised through asset sale is expected to help fund E&P investments. However, the company will continue to look at all opportunities to enhance long-term shareholder value. We expect the recent initiatives undertaken by the company to have a positive impact on its third-quarter earnings.
However, Hess has reduced its 2016 capital expenditure by 48% to $2.1 billion from $4 billion spent in 2015. As a result, production levels are expected to decrease and are estimated to range between 315 thousand barrels of oil equivalent per day (mboed) and 325 mboed. The drastic fall in oil prices has affected all oil majors and the impact can be witnessed in the reduced level of operations and cost cuts. This impact is likely to be felt in the upcoming quarterly results as well.
Earnings Whispers
Our proven model does not conclusively show that Hess is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. 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, stands at -3.31%. This is because the Most Accurate estimate stands at a loss of $1.25, while the Zacks Consensus Estimate is pegged at a loss of $1.21. This is very meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: Hess carries a Zacks Rank #3. Though the company has a favorable Zacks Rank, its negative ESP complicates our surprise prediction.
Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
Stocks to Consider
Here are some companies from the same space which, according to our model, have the right combination of elements to post an earnings beat this quarter:
Spectra Energy Corp. (SE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Nov 2.
Enterprise Products Partners LP (EPD - Free Report) has an Earnings ESP of +3.33% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Oct 27.
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Hess Corp (HES): What's in Store this Earnings Season?
Hess Corporation (HES - Free Report) , a global exploration and production (E&P) company that develops, produces, purchases, transports and sells crude oil and natural gas, is expected to report third-quarter 2016 earnings on Oct 26, before the market opens.
In the last quarter, the company reported loss from continuing operations of $1.11 per share, narrower than the Zacks Consensus Estimate of a loss of $1.26. However, the loss widened substantially from the year-ago quarter loss of 52 cents per share. The underperformance was mainly attributable to the plunge in oil and gas prices.
Let’s see how things are shaping up for this announcement.
HESS CORP Price and EPS Surprise
HESS CORP Price and EPS Surprise | HESS CORP Quote
Factors to Consider This Quarter
Hess has transformed to a predominantly E&P entity, thereby shifting its growth approach from high-impact exploration to low-risk unconventionals, and a smaller, more focused exploration portfolio. The company divested its downstream businesses, including energy marketing, terminals, retail marketing and refining operations. In view of the global economic slowdown and new refining capacity entering the world market, the aforesaid decisions will help enhance Hess’ shareholder value and boost its earnings.
Hess’ priority remains investment in future growth with a balanced approach between unconventional, exploitation and exploration. Recently, the company divested several assets and is in the process of shedding other properties. The amount raised through asset sale is expected to help fund E&P investments. However, the company will continue to look at all opportunities to enhance long-term shareholder value. We expect the recent initiatives undertaken by the company to have a positive impact on its third-quarter earnings.
However, Hess has reduced its 2016 capital expenditure by 48% to $2.1 billion from $4 billion spent in 2015. As a result, production levels are expected to decrease and are estimated to range between 315 thousand barrels of oil equivalent per day (mboed) and 325 mboed. The drastic fall in oil prices has affected all oil majors and the impact can be witnessed in the reduced level of operations and cost cuts. This impact is likely to be felt in the upcoming quarterly results as well.
Earnings Whispers
Our proven model does not conclusively show that Hess is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. 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, stands at -3.31%. This is because the Most Accurate estimate stands at a loss of $1.25, while the Zacks Consensus Estimate is pegged at a loss of $1.21. This is very meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: Hess carries a Zacks Rank #3. Though the company has a favorable Zacks Rank, its negative ESP complicates our surprise prediction.
Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
Stocks to Consider
Here are some companies from the same space which, according to our model, have the right combination of elements to post an earnings beat this quarter:
Baker Hughes Inc. , which is expected to release third-quarter earnings results on Oct 25, has an Earnings ESP of +4.65% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Spectra Energy Corp. (SE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Nov 2.
Enterprise Products Partners LP (EPD - Free Report) has an Earnings ESP of +3.33% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Oct 27.
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>>