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Spectra Energy (SE): What's in the Cards in Q4 Earnings?

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Texas-based Spectra Energy Corporation (SE - Free Report) is expected to report fourth-quarter 2016 earnings on Feb 17, before the market opens.

Last quarter, the company reported earnings of 31 cents per share that beat the Zacks Consensus Estimate of 26 cents. The quarterly earnings also increased from year-earlier quarter earnings of 23 cents per share.

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

Spectra Energy Corp Price and EPS Surprise

 

Spectra Energy Corp Price and EPS Surprise | Spectra Energy Corp Quote

Factors Likely to Influence this Quarter

Spectra Energy and Enbridge are expected to merge by the first quarter of 2017, creating the largest energy infrastructure company in North America. With a diverse base of assets that comprises crude, liquids and natural gas pipelines along with terminal and midstream operations, the merged entity will be able to reach the key supply basins and markets. Most importantly, the joint entity will be in a position to witness 10–12% yearly dividend growth through 2024.

Moreover, the recent deal between OPEC and non-OPEC players to curb oil output crude has already started bearing fruit. With the development on the crude front, we expect an increase in exploration and production activities in the coming days, which will need more transportation and storage operations. This is likely to have a positive impact on the to-be-reported quarter results.

However, we are concerned about Spectra Energy’s high debt level. The company has a heavy debt-to-capitalization ratio of 55.9%. Additionally, major investments in several Canadian projects expose the company to fluctuations in currency rates, which may affect the results of its operations.

Earnings Whispers

Our proven model does not conclusively show that Spectra Energy is likely to beat on earnings this time because it does not have 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 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 33 cents. This is very meaningful and a leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Spectra Energy carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. However, Spectra Energy’s Earnings ESP of 0.00% makes surprise prediction difficult.

Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.  

Stocks to Consider

Here are some companies in the energy sector that investors may consider, as our model shows that they have the right combination of elements to beat estimates this quarter:

Sunrun Inc. (RUN - Free Report) , which is expected to release fourth-quarter earnings results on Mar 8, has an Earnings ESP of +244.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cimarex Energy Co. has an Earnings ESP of +1.72% and a Zacks Rank #3. It is expected to release earnings results on Feb 15.

Newfield Exploration Company has an Earnings ESP of +10.81% and a Zacks Rank #3. The company is expected to release earnings results on Feb 22.

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