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Natural gas exploration and production (E&P) company Encana Corporation (ECA - Analyst Report) is scheduled to report its fourth-quarter and full-year 2012 results on Thursday, Feb 14, 2013.

In the third quarter, the company delivered a negative 128.00% earnings surprise, due to a depressing natural gas environment and higher operating expenses. Moreover, Encana delivered negative earnings surprises in 3 of the last 4 quarters, with an average miss of 256.49%.  Let’s see how things are shaping up prior to this announcement.

Factors to Consider This Quarter

Encana is well positioned for long-term growth based on its collaboration with Mitsubishi in developing the Cutbank Ridge –one of the most fertile and low-cost resource rich acreages in North America. Additionally, we appreciate Encana’s strategy of disposing assets that do not fit into its long-term growth plan.

However, with the growing popularity of renewable sources of energy such as wind and solar, the operators of natural gas resources are facing tough competition. Although expensive, many customers are opting the alternate sustainable sources of energy as these are environmentally friendly.

Also, Encana’s extensive natural gas exposure makes it sensitive to gas price fluctuations, compared to its more diversified independent peers with higher oil production.

In fact, the Zacks Consensus Estimate for the fourth quarter has moved down by 1 cent to 32 cents per share over the last 30 days as the tendency for a downward revision was obvious.

Earnings Whispers

Our proven model does not conclusively show that Encana Corporation is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1 (Strong Buy) or at least Zacks Rank #2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Negative Zacks ESP:This is because the Most Accurate estimate stands at 28 cents while the Zacks Consensus Estimate is higher at 32 cents. This results in a difference of -12.50%.

Zacks Rank #3 (Hold): Encana’s Zacks Rank #3, however, increases the forecasting power of ESP. That said, we also need to have a positive ESP to be confident of an earnings surprise call.

Other Stocks to Consider

Here are some 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:

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

Northern Tier Energy LP (NTI - Snapshot Report), earnings ESP of +2.94% and Zacks Rank #1 (Strong Buy).

Hercules Offshore Inc. (HERO), earnings ESP of +14.29% and Zacks Rank #2 (Buy).

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