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Oil Stocks to Watch for Earnings on Feb 24: COG, ERF & CQH

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We have reached the final stretch of the Q4 earnings season, with results on board from 411 S&P 500 members that combined account for more than 88% of the index’s total market capitalization. And with 49 S&P 500 members coming up with results this week, one would have seen Q4 numbers from 92% of the index’s total membership by the end of Friday.

According to our latest Earnings Preview report, overall earnings for the companies that have already reported are up 8% from the same period last year on 4.9% higher revenues, with 68.9% positive earnings surprises and 54.7% beating revenue estimates.

Energy Finally Turns the Corner

Following eight back-to-back quarters of earnings declines, analysts said that the sector was likely to get better in the fourth quarter and clock its first positive earnings growth after 2 years. With estimate revisions going up following OPEC’s Algeria grandstand, the Oil/Energy sector’s earnings were expected to improve 8.8% from the fourth quarter 2015 levels.

True to the predictions, the sector has come out swinging. For the 69.4% sector components on the S&P 500 index that have reported Q4 results, total earnings are up 14.7% on 3.1% higher revenues. 68% of the companies have been successful in beating earnings and revenue estimates.

The Oil/Energy sector’s positive growth largely reflects better-than-expected quarterly profit from bellwether ExxonMobil Corp. (XOM - Free Report) , which more than offset smaller rival Chevron Corp.’s (CVX - Free Report) disappointing Q4 numbers.

Let's take a look at how oil and gas prices behaved during the fourth quarter. 

Q4: Rebounding Oil & Natural Gas Prices

The OPEC deal and extreme weather conditions engineered a hefty rise in oil and gas prices during the fourth quarter.

A historic OPEC production cut agreement, together with help from non-OPEC producers saw oil prices end the year at $53.72 a barrel - representing a gain of 11.4% sequentially and 45% for the year.

Meanwhile, natural gas embarked on its own upward journey, with futures jumping around 25% just in the fourth quarter. Ending the year at $3.724 per million Btu (MMBtu) – up 59% from 2015 – the heating fuel was buoyed by a cold snap that translated into strong demand.

Stocks to Watch for Earnings on Feb 24

Let’s see what’s in store for three energy companies that are lined up for earnings release on Feb 24.

An independent energy exploration company with producing properties mainly in the continental U.S., Cabot Oil & Gas Corp. is expected to report fourth-quarter 2016 results before the opening bell. 

In the third quarter of 2016, this Houston, TX-headquartered upstream player recorded a wider-than-expected loss, affected by lower liquids prices.

Coming to earnings surprise history, the company has an unenviable record: its missed estimates in 2 of the last four quarters and reported in line in the other two.

An earnings beat looks unlikely for Cabot this time around too. This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

For the quarter to be reported, Cabot has an earnings ESP of 0.00%, while it carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, a 0.00% Earnings ESP makes surprise prediction difficult. (Read more: Will Q4 Earnings Hold a Surprise for Cabot Stock?) You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Simultaneously, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

We then have Enerplus Corp. (ERF - Free Report) coming out with fourth-quarter 2016 results prior to the market opening. Coming to earnings surprise history, the Calgary, Alberta-based exploration and production company – which is a focused on the Bakken/Three Forks and Marcellus Shale – has a bad track of having outperformed estimates just once in the last four quarters.

And our model does not indicate that Enerplus is likely to beat on earnings this time around as well, as it has a Zacks Rank #4 and an Earnings ESP of 0.00%.

Enerplus Corporation Price and EPS Surprise

 

Enerplus Corporation Price and EPS Surprise | Enerplus Corporation Quote

Lastly, there is midstream partnership Cheniere Energy Partners L.P. Holdings LLC coming out with fourth-quarter numbers.

Houston, TX-based Cheniere Energy Partners L.P. Holdings, by virtue of its 55.9% ownership in Cheniere Energy Partners L.P. (CQP), primarily operates the Sabine Pass natural gas regasification and liquefaction facilities.

In each of the last four quarters, the entity delivered an earnings surprise of 0.00%.

With an Earnings ESP of 0.00% and a Zacks Rank #5, our proven model shows that an earnings beat is uncertain for Cheniere Energy Partners L.P. Holdings in the upcoming quarterly release.

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