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Apache (APA): What's in the Cards this Earnings Season?
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U.S. energy firm Apache Corp. (APA - Free Report) is set to release third-quarter 2016 results before the opening bell on Nov 3.
Last quarter, the company delivered a negative earnings surprise of 8.33%. Apache reported an average positive surprise of 55.75% in the preceding four quarters. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
Apache has a large, geographically diversified reserve base and a multi-year trend in reserve replacement and production growth. The company has been undertaking initiatives to align capital spending with cash flows while continuing to build a high-quality inventory of projects that are capable of delivering attractive returns even amid a low oil price environment. This strategy of the company bodes well for the upcoming earnings.
Moreover, Apache's cost cutting and portfolio restructuring efforts are expected to improve its future earnings performance.
However, Apache’s results – just like other independent exploration and production companies – are directly exposed to oil and gas prices. Continued weakness in commodity prices has significantly affected the company’s revenues, earnings and cash flows.
Also, the effect of the oil and gas price slump has been more profound on Apache’s top line, as the energy explorer did not hedge its production.
What Our Model Indicates
Our proven model does not conclusively show that Apache is likely to 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% since both estimates are pegged at a loss of 12 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Apache has a Zacks Rank #3, which increases the predictive power of ESP. However, we need a positive ESP to be confident of an earnings beat.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.
Stocks That Warrant a Look
Though an earnings beat looks uncertain for Apache, here are some domestic upstream companies 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 LP is expected to release third-quarter earnings results on Nov 4. The partnership has an Earnings ESP of +2.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
CSI Compressco LP has an Earnings ESP of +27.27% and a Zacks Rank #3. The company is anticipated to release third-quarter earnings on Nov 4.
Archrock Partners, L.P. has an Earnings ESP of +8.33% and a Zacks Rank #1. The company is likely to release third-quarter earnings on Nov 1.
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Apache (APA): What's in the Cards this Earnings Season?
U.S. energy firm Apache Corp. (APA - Free Report) is set to release third-quarter 2016 results before the opening bell on Nov 3.
Last quarter, the company delivered a negative earnings surprise of 8.33%. Apache reported an average positive surprise of 55.75% in the preceding four quarters. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
Apache has a large, geographically diversified reserve base and a multi-year trend in reserve replacement and production growth. The company has been undertaking initiatives to align capital spending with cash flows while continuing to build a high-quality inventory of projects that are capable of delivering attractive returns even amid a low oil price environment. This strategy of the company bodes well for the upcoming earnings.
Moreover, Apache's cost cutting and portfolio restructuring efforts are expected to improve its future earnings performance.
APACHE CORP Price and EPS Surprise
APACHE CORP Price and EPS Surprise | APACHE CORP Quote
However, Apache’s results – just like other independent exploration and production companies – are directly exposed to oil and gas prices. Continued weakness in commodity prices has significantly affected the company’s revenues, earnings and cash flows.
Also, the effect of the oil and gas price slump has been more profound on Apache’s top line, as the energy explorer did not hedge its production.
What Our Model Indicates
Our proven model does not conclusively show that Apache is likely to 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% since both estimates are pegged at a loss of 12 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Apache has a Zacks Rank #3, which increases the predictive power of ESP. However, we need a positive ESP to be confident of an earnings beat.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.
Stocks That Warrant a Look
Though an earnings beat looks uncertain for Apache, here are some domestic upstream companies 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 LP is expected to release third-quarter earnings results on Nov 4. The partnership has an Earnings ESP of +2.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
CSI Compressco LP has an Earnings ESP of +27.27% and a Zacks Rank #3. The company is anticipated to release third-quarter earnings on Nov 4.
Archrock Partners, L.P. has an Earnings ESP of +8.33% and a Zacks Rank #1. The company is likely to release third-quarter earnings on Nov 1.
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>>