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Can Transocean (RIG) Keep Its Earnings Streak Alive in Q1?

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Transocean Limited (RIG - Free Report) — an offshore contract drilling service provider — is set to release first-quarter 2018 financial results after the closing bell on Apr 30.

Last quarter, the company delivered a positive earnings surprise of 11.11%. Transocean has outperformed the Zacks Consensus Estimate in the preceding four quarters, with an average beat of 180.90%. Investors should also note that Transocean hasn’t missed earnings estimates since 2013.

Transocean Ltd. Price and Consensus

 

Transocean Ltd. Price and Consensus | Transocean Ltd. Quote

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

Factors Likely to Influence the Quarter

Per EIA data, the commodity rose about 7.5% in the first three months of 2018 to finish the quarter at $64.87 per barrel. In fact, the first quarter of the year saw the U.S. oil benchmark attain its highest settlement since December 2014, despite a record high domestic production. Crude was supported by various catalysts including strong demand, and continued production curb from OPEC and its allies. The recovering commodity market calls for higher investments from oil majors, translating into more contracts from drilling giants like Transocean.

The acquisition of Norwegian contractor, Songa Offshore has boosted the backlog and sales of Transocean, and enhanced its long-term opportunities in the Norwegian markets. Transocean’s strong backlog, which stands at $12.5 billion, reflects steady demand from its customers. It enables Transocean to navigate the current uncertain environment, better than many of its peers.

The Zacks Consensus Estimate for contract drilling revenues is pegged at $602 million, above $589 million recorded in the last reported quarter.

The Zacks Consensus Estimate for operating revenues from the Harsh Environment Floaters is $193 million, higher than the prior-year quarter’s figure of $122 million. The Zacks Consensus Estimate for operating revenues from Midwater Floaters is $18 million, higher than the year-ago quarter’s $13 million. The Zacks Consensus Estimate for Deepwater Floaters is pegged at $36.30 million, compared with $35 million reported in the year-ago period.

We also appreciate Transocean's aggressive cost-reduction programs, which will enable it to shore up its operational performance. The company’s total operating expenses in 2017 declined 26% to stand at $1,388 million.

What the Zacks Model Unveils

Our proven model shows that Transocean is likely to beat earnings in the to-be-reported quarter because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP for this company is +2.64%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Transocean carries a Zacks Rank #3 (Hold), which when combined with a positive ESP, makes us confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have significantly higher chances of beating estimates. On the other hand, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Other Energy Stocks With Favorable Combination

Transocean is not the only energy firm looking up this earnings season. Here are some other companies within the same industry, which according to our model also have the right combination of elements to post an earnings beat this quarter:

Apache Corporation (APA - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #3. The upstream player is anticipated to release earnings on May 2.

NOW Inc. (DNOW - Free Report) has an Earnings ESP of +15.29% and carries a Zacks Rank #3. The energy equipment maker is expected to release earnings results on May 2.

Anadarko Petroleum Corporation has an Earnings ESP of +12.96% and a Zacks Rank #3. The energy explorer is anticipated to release earnings results on May 1.

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