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EXCO Resources (XCO) Q3 Earnings: A Surprise in Store?
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Independent natural gas producer, EXCO Resources Inc. is scheduled to release third-quarter 2016 results on Tuesday, Oct 25.
In the preceding three-month period, the Dallas, TX-based upstream player delivered a positive earnings surprise of 28.57% in spite of challenges associated with a steep drop in oil price. This was primarily owing to effective cost-control measures.
In terms of earnings surprise history, the company has an excellent record. Itsurpassed estimates in each of the last four quarters with an average beat of 33.20%.
Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
The third quarter saw natural gas advancing around 25% sequentially. Natural gas futures during the Jul–Sep 2016 period hovered mostly between $2.5 per million Btu (MMBtu)and $3 per MMBtu. Given that the commodity makes up for around 90% of EXCO Resources’ total production, the improvement in pricing bodes well for the company.
Moreover, the company’s successful cost-reduction initiatives are expected to cushion the resultsto a large extent. The company’s efforts to improve liquidity and restructure the balance sheet to enhance capital structure are also expected to have a positive impact on the quarterly results.
However, EXCO Resources’ core operational region – the Haynesville shale – has seen a drastic fall in the number of gas rigs employed. Production is likely to suffer as a result.
Our proven model does not conclusively show that EXCO Resources 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. 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 0.00%.
Zacks Rank: EXCO Resources has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for EXCO Resources, here are some energy playersyou may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
Archrock Partners, L.P. has an Earnings ESP of +8.33% and a Zacks Rank #1. The partnership is expected to release third-quarter earnings results on Nov 1.You can seethe complete list of today’s Zacks #1 Rank stocks here.
Alliance Resource Partners LP (ARLP - Free Report) has an Earnings ESP of +5.00% and a Zacks Rank #1. The partnership is anticipated to release third-quarter earnings results on Oct 28.
CONE Midstream Partners LP has an Earnings ESP of +2.70% and a Zacks Rank #1. The partnership is likely to release third-quarter earnings results on Nov 4.
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EXCO Resources (XCO) Q3 Earnings: A Surprise in Store?
Independent natural gas producer, EXCO Resources Inc. is scheduled to release third-quarter 2016 results on Tuesday, Oct 25.
In the preceding three-month period, the Dallas, TX-based upstream player delivered a positive earnings surprise of 28.57% in spite of challenges associated with a steep drop in oil price. This was primarily owing to effective cost-control measures.
In terms of earnings surprise history, the company has an excellent record. Itsurpassed estimates in each of the last four quarters with an average beat of 33.20%.
Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
The third quarter saw natural gas advancing around 25% sequentially. Natural gas futures during the Jul–Sep 2016 period hovered mostly between $2.5 per million Btu (MMBtu)and $3 per MMBtu. Given that the commodity makes up for around 90% of EXCO Resources’ total production, the improvement in pricing bodes well for the company.
Moreover, the company’s successful cost-reduction initiatives are expected to cushion the resultsto a large extent. The company’s efforts to improve liquidity and restructure the balance sheet to enhance capital structure are also expected to have a positive impact on the quarterly results.
However, EXCO Resources’ core operational region – the Haynesville shale – has seen a drastic fall in the number of gas rigs employed. Production is likely to suffer as a result.
EXCO RESOURCES Price and EPS Surprise
EXCO RESOURCES Price and EPS Surprise | EXCO RESOURCES Quote
Earnings Whispers
Our proven model does not conclusively show that EXCO Resources 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. 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 0.00%.
Zacks Rank: EXCO Resources has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for EXCO Resources, here are some energy playersyou may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
Archrock Partners, L.P. has an Earnings ESP of +8.33% and a Zacks Rank #1. The partnership is expected to release third-quarter earnings results on Nov 1.You can see the complete list of today’s Zacks #1 Rank stocks here.
Alliance Resource Partners LP (ARLP - Free Report) has an Earnings ESP of +5.00% and a Zacks Rank #1. The partnership is anticipated to release third-quarter earnings results on Oct 28.
CONE Midstream Partners LP has an Earnings ESP of +2.70% and a Zacks Rank #1. The partnership is likely to release third-quarter earnings results on Nov 4.
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>>