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Spectra Energy (SE) Q3 Earnings: Is a Beat in the Cards?
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Premier natural gas company, Spectra Energy Corp. (SE - Free Report) is expected to report third-quarter 2016 earnings on Nov 2, before the opening bell.
Last quarter, the company’s earnings of 24 cents per share lagged the Zacks Consensus Estimate of 26 cents but increased by a penny from the year-ago earnings of 23 cents. Let’s see how things are shaping up prior to the announcement.
Our proven model shows that Spectra Energy is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is +12.50%. This is because the Most Accurate estimate stands at 27 cents, while the Zacks Consensus Estimate is pegged at 24 cents. This is very meaningful and a leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Spectra Energy has a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings.
Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
The combination of Spectra Energy’s favorable Zacks Rank and a positive ESP makes us confident about an earnings beat.
Currently, the stock is trading at $42.71. We expect the release to lead to stock movement.
Factors Likely to Influence this Quarter
Although we believe that commodity price concerns will remain in the near term, the company’s core fee-based businesses of storage, transmission, distribution as well as Canadian gathering and processing have the potential to move the needle toward solid earnings and cash flow growth in the long run.
Going forward, Spectra intends to increase its presence in the oil and refined products pipelines, storage tanks and terminals businesses. This should help to boost its top line and bottom line.
Spectra plans to deploy about $25 billion over the next decade on fee-based gas infrastructure growth projects. The company expects to commission around eight projects through 2016. Further, growth is expected from its master limited partnership (MLP) dropdown strategy. We expect these business moves to have a positive impact on the upcoming earnings.
However, Spectra’s results are vulnerable to fluctuations in natural gas markets. The proposed liquid-rich drilling activities by the company clearly suggest that low natural gas prices have little chance of recovery in the near term, which raises concerns.
Though most of Spectra's revenues are based on regulated tariff rates, an unfavorable macro environment may result in lower earnings and cash flows. Moreover, the company has a relatively heavy debt-to-capitalization ratio of 54.8% and hence, its balance sheet remains highly leveraged.
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:
Devon Energy Corp (DVN - Free Report) , which is slated to release earnings results on Nov 1, has an Earnings ESP of +20.00% and a Zacks Rank #2.
Williams Partners L.P. has an Earnings ESP of +32.00% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Nov 2.
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Spectra Energy (SE) Q3 Earnings: Is a Beat in the Cards?
Premier natural gas company, Spectra Energy Corp. (SE - Free Report) is expected to report third-quarter 2016 earnings on Nov 2, before the opening bell.
Last quarter, the company’s earnings of 24 cents per share lagged the Zacks Consensus Estimate of 26 cents but increased by a penny from the year-ago earnings of 23 cents. Let’s see how things are shaping up prior to the announcement.
SPECTRA ENERGY Price and EPS Surprise
SPECTRA ENERGY Price and EPS Surprise | SPECTRA ENERGY Quote
Earnings Whispers
Our proven model shows that Spectra Energy is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is +12.50%. This is because the Most Accurate estimate stands at 27 cents, while the Zacks Consensus Estimate is pegged at 24 cents. This is very meaningful and a leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Spectra Energy has a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings.
Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
The combination of Spectra Energy’s favorable Zacks Rank and a positive ESP makes us confident about an earnings beat.
Currently, the stock is trading at $42.71. We expect the release to lead to stock movement.
Factors Likely to Influence this Quarter
Although we believe that commodity price concerns will remain in the near term, the company’s core fee-based businesses of storage, transmission, distribution as well as Canadian gathering and processing have the potential to move the needle toward solid earnings and cash flow growth in the long run.
Going forward, Spectra intends to increase its presence in the oil and refined products pipelines, storage tanks and terminals businesses. This should help to boost its top line and bottom line.
Spectra plans to deploy about $25 billion over the next decade on fee-based gas infrastructure growth projects. The company expects to commission around eight projects through 2016. Further, growth is expected from its master limited partnership (MLP) dropdown strategy. We expect these business moves to have a positive impact on the upcoming earnings.
However, Spectra’s results are vulnerable to fluctuations in natural gas markets. The proposed liquid-rich drilling activities by the company clearly suggest that low natural gas prices have little chance of recovery in the near term, which raises concerns.
Though most of Spectra's revenues are based on regulated tariff rates, an unfavorable macro environment may result in lower earnings and cash flows. Moreover, the company has a relatively heavy debt-to-capitalization ratio of 54.8% and hence, its balance sheet remains highly leveraged.
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:
Vertex Energy Inc (VTNR - Free Report) , which is expected to release earnings results on Nov 3, has an Earnings ESP of +37.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Devon Energy Corp (DVN - Free Report) , which is slated to release earnings results on Nov 1, has an Earnings ESP of +20.00% and a Zacks Rank #2.
Williams Partners L.P. has an Earnings ESP of +32.00% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Nov 2.
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>>