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Can Whiting Petroleum (WLL) Pull a Surprise in Q3 Earnings?

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Domestic oil and gas explorer Whiting Petroleum Corp. is set to release third-quarter 2016 results after the closing bell on Wednesday, Oct 26.

What Investors Need to Know

The company’s stock performance has been pretty exciting lately. Shares have recovered nicely from its rough start to 2016 when oil prices fell to a 12-year low.

In fact, Whiting Petroleum ran up 10% in the past month thanks to commitments by OPEC and non-OPEC players to slash production targets. But this report will be a test to see if this trend continues heading into 2017. Fortunately for investors, the stock finds itself in a solid industry rank position – in the top 32% overall.

However, there are some questions for Whiting Petroleum too. It has an 'F' for its VGM Score. Moreover, the company is on a bit of a slippery surface, having missed the Zacks Consensus Estimate in each of the last three reports, as you can see in the chart below:

WHITING PETROLM Price and EPS Surprise

 

WHITING PETROLM Price and EPS Surprise | WHITING PETROLM Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Unlike the last quarter, where oil advanced more than 26% sequentially to notch up the best quarterly percentage gain in 7 years, the Jun-Sep 2016 period turned out to be a rather flat one with crude barely advancing. In fact, the West Texas Intermediate (WTI) crude futures during the third quarter hovered around the $45 per barrel mark, flat from the second quarter and down from $46.50 in the same period last year. We believe that the dismal crude pricing scenario will continue to weigh on Whiting Petroleum’s bottom line.

However, efficiencies on the production front might be able to mitigate some of the damage. The company expects to maintain a flat production profile in the upcoming few quarters despite asset sales.

Moreover, Whiting Petroleum has been able to reduce costs that will provide some buffer amid tumbling commodity prices. 

Earnings Whispers

Our proven model does not conclusively show that Whiting Petroleum 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) to be able to beat consensus estimates. 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%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at  a loss of 39 cents.

Zacks Rank: Whiting Petroleum has a Zacks Rank #3. Though a Zacks Rank #3 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 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for Whiting Petroleum, here are some firms from the energy space you 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:

CONE Midstream Partners L.P. has an Earnings ESP of +2.7% and a Zacks Rank #1. The partnership is expected to release earnings results on Nov 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

NuStar Energy L.P. (NS - Free Report) has an Earnings ESP of +6.25% and a Zacks Rank #2. The partnership is anticipated to release earnings on Nov 2.

Comstock Resources Inc. (CRK - Free Report) has an Earnings ESP of +3.74% and a Zacks Rank #2. The company is likely to release earnings on Nov 8.

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