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What's in the Cards for EOG Resources (EOG) in Q3 Earnings?

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EOG Resources, Inc. (EOG - Free Report) is expected to release third-quarter 2018 results on Nov 1.

In the last reported quarter, the upstream energy company’s earnings of $1.37 per share beat the Zacks Consensus Estimate of $1.25. The company surpassed estimates in all of the trailing four quarters, delivering a positive earnings surprise of 37.5%.
 

EOG Resources, Inc. Price, Consensus and EPS Surprise

 

EOG Resources, Inc. Price, Consensus and EPS Surprise | EOG Resources, Inc. Quote

 

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

Which Way are Estimates Trending?

Let’s have a look at the estimate revision trend to get a clear picture of what analysts are thinking about the company before earnings release.

The Zacks Consensus Estimate of $1.56 for third-quarter earnings has seen six upward and three downward revisions by firms in the past 30 days. It compares favorably with the year-ago quarter’s earnings per share (EPS) of 19 cents.

Further, the Zacks Consensus Estimate for third-quarter revenues is pegged at $4.6 billion, reflecting an improvement of 72.6% from the year-ago quarter’s tally.

Factors at Play

The Zacks Consensus Estimate for total Crude Oil and Condensate Volumes is pegged at 410 thousand barrels per day (MBbl/d), reflecting a rise from year-ago quarter’s figure of 328 MBbl/d and preceding quarter’s tally of 385 MBbl/d. The Zacks Consensus Estimate for Average Crude Oil and Condensate Prices (Composite) is at $68 per barrel, indicating a rise from year-ago quarter’s tally of $48.11 a barrel.  

The Zacks Consensus Estimate for total Natural Gas Liquids Volumes is at 116 MBbl/d, indicating a rise from year-ago quarter’s tally of 87 MBbl/d. The Zacks Consensus Estimate for Average Natural Gas Liquids Prices (Composite) is at $26.7 per barrel, showing a rise from year-ago quarter’s figure of $22.38 a barrel but lower than the last reported quarter’s tally of $27.86 per barrel.

The Zacks Consensus Estimate for Average Natural Gas Prices (Composite) is at $2.63 per thousand cubic feet (Mcf), reflecting an increase from year-ago quarter’s level of $2.19 per Mcf but lower than $2.69 per Mcf in the second quarter.

Moreover, the Zacks Consensus Estimate for total production is pegged at 68 million barrels of oil equivalent (MMBoe), indicating a rise from year-ago quarter’s figure of 55 MMBoe.

However, rising costs are a concern. Through the first-half of 2018, the company’s lease and well operating expenses escalated more than 20%. If this trend continues through the third quarter, the bottom line is expected to be dented.

While rising volumes and product prices are expected to benefit third-quarter results, climbing costs can offset the upside.

What Does the Zacks Model Unveil?

Our proven model does not show that EOG Resources is likely to beat the Zacks Consensus Estimate in the to-be-reported quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Earnings ESP:.EOG Resources has an ESP of -0.50% as the Most Accurate Estimate is at $1.24, while the Zacks Consensus Estimate is pegged at $1.25. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, EOG Resources carries a Zacks Rank #2. Though a Zacks Rank of #2increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Energy Stocks With Favorable Combination

Here are some companies from the energy space which, according to our model, have the right combination of elements to post an earnings beat in the quarter to be reported.

Enterprise Products Partners L.P. (EPD - Free Report) , based in Houston, TX, is a leading midstream energy player in North America. The company has an Earnings ESP of +0.89% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Plano, TX-based Denbury Resources Inc is an exploration and production (E&P) company engaged in the acquisition, development, operation and exploration of oil as well asnatural gas properties. The company has an Earnings ESP of +10.15% and carries a Zacks Rank #3.

Houston, TX-based Ensco plc is a leading supplier of offshore contract drilling services to the oil and gas industry. The company has an Earnings ESP of +3.65% and a Zacks Rank #3.

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