Diamond Offshore Drilling Inc. ( DO - Analyst Report ) will release its fourth quarter 2012 financial results on Feb 5, 2013. We expect the company to beat expectations.

Why a Likely Positive Surprise?

Our proven model shows that Diamond is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +0.91%. This is meaningful and a leading indicator of a likely positive earnings surprise for this offshore driller.

Zacks #3 Rank (Hold): We note that 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 going into an earnings announcement.

The combination of Diamond’s Zacks Rank #3 (Hold) and +0.91% ESP makes us confident of a positive earnings beat this release.

Earnings Drivers

Diamond’s efforts to increase its footprint in emerging markets (such as Brazil and West Africa) as well as benefits from the recent deepwater discoveries are expected to lead to a positive earnings surprise. Again, the gradual improvement in the Gulf of Mexico (especially after the deepwater drilling ban was lifted), along with better bidding activity, is likely to benefit a contract drilling company like Diamond Offshore.

The positive trend was also seen in the 26.73% earnings surprise in the last reported quarter. This was backed by solid growth witnessed in its backlog with extensions as well as new contracts at increased dayrates on its drillships and newbuilds.

Other Stocks to Consider

Diamond is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 industry operators:

EOG Resources, Inc. ( EOG - Analyst Report ) , earnings ESP of +2.19% and Zacks Rank #3 (Hold).

Enbridge Energy Partners LP ( EEP - Analyst Report ) , earnings ESP of +3.85% and Zacks Rank #3 (Hold).

Southwestern Energy Co. ( SWN - Analyst Report ) , earnings ESP of +2.33% and Zacks Rank #3 (Hold).