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We expect oil and gas drilling contractor Helmerich & Payne Inc. (HP - Analyst Report) to beat expectations when it reports first-quarter fiscal 2013 results before the opening bell tomorrow, Thursday, Jan 31.

Why a Likely Positive Surprise?

Our proven model shows that Helmerich & Payne is likely to beat earnings because it has the right combination of two key factors.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), the difference between the Most Accurate estimate of $1.32 and the Zacks Consensus Estimate of $1.28, stands at 3.13%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.  

Zacks Rank #3 (Hold): The stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered while going into an earnings announcement.

The combination of Helmerich & Payne’s Zacks Rank #3 (Hold) and 3.13% ESP make us very confident in looking for a positive earnings beat on Jan 31, 2013.

What is Driving the Better Than Expected Earnings?

Helmerich & Payne remains relatively unscathed from any economic turmoil, as the company’s major work contracts are with well capitalized oil majors and the larger independent oil companies. Additionally, term contracts and shale drilling demand for its rigs have helped Helmerich & Payne maintain a relatively high level of utilization.

The positive trend is seen in the trailing four quarter average surprise of 8.35%. The company’s fourth-quarter 2012 surprise was 9.68% owing to better drilling activities and innovative technological applications.  

Other Stocks to Consider

Other companies you may want to consider on the basis of our model which shows that they have the right combination of elements to post an earnings beat this quarter are as follows:

Atlas Energy L.P (ATLS - Snapshot Report), Earnings ESP of + 260.00% and Zacks Rank #1 (Strong Buy).   

Northern Tier Energy LP (NTI - Snapshot Report), Earnings ESP of +22.86% and Zacks Rank #1 (Strong Buy).  

Hercules Offshore Inc. (HERO - Snapshot Report), Earnings ESP of + 14.29% and Zacks Rank #2 (Buy).

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