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What's in the Offing for Concho Resources (CXO) Q2 Earnings?

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Concho Resources Inc.  is scheduled to release second-quarter 2020 results on Wednesday Jul 29, after the closing bell.

The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at 43 cents per share and for revenues stands at $847.79 million.

Against this backdrop, let’s analyze the factors that might have impacted the company’s performance in the June quarter.

Factors at Play

Concho Resources is an independent oil and gas explorer and producer with two major areas of interest, such as output growth and oil price realizations. Both key components of the company (including derivatives) are giving negative vibes for its upcoming quarterly release.

The Zacks Consensus Estimate for second-quarter average crude prices with derivatives implies a drop from the year-ago reported figure, indicative of a possible decrease in the company’s profitability. The same for the average crude price (with hedges) stands at $48.02 per barrel, hinting at a 9.4% reduction from the year-earlier reported number. The consensus estimate for the company’s overall production price is pegged at $32.16 per barrels of oil equivalent (again with derivatives), suggesting a decline from the year-ago reported price of $36.02.

Further, the consensus mark for second-quarter total production volumes is pegged at 28,064 thousand barrels of oil equivalent (MBoe), on average, indicating a fall from the year-ago reported figure of 29,910 MBoe.

However, the company’s cost-reduction efforts have been encouraging throughout. It controls its capex at a steady pace by limiting its spending levels. For 2020, the company trimmed its capital budget by 40% to $1.6 billion from its original guidance of $2.7 billion after reckoning the ongoing crash in commodity prices. This, in turn, is expected to have lifted the company’s earnings in the second quarter.

What Does Our Model Say?

Our proven model does not conclusively predict an earnings beat for Concho Resources this season. The combination of a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Concho Resources has an Earnings ESP of -4.03%.

Zacks Rank: Concho Resources carries a Zacks Rank #3, currently.

Highlights of Q1 Earnings & Surprise Record

In the last reported quarter, Concho Resources reported net income per share (excluding special items) of 72 cents, in line with the Zacks Consensus Estimate as well as the prior-year earnings. The bottom line was favorably impacted by better-than-anticipated production volumes, partly offset by lower commodity prices.

Moreover, this upstream player’s output of 326 thousand barrels of oil equivalent per day (MBoe/d) surpassed the Zacks Consensus Estimate of 323.8 MBoe/d.

The Permian-focused player, however, generated revenues of $922 million, missing the consensus mark and also the year-ago level by 16.5%.

As far as its earnings surprises are concerned, this Midland, TX-based oil and gas producer lagged the Zacks Consensus Estimate in two of the trailing four quarters, beating the same in one quarter and meeting estimates in the remaining quarter, the average surprise being 4.86%. This is depicted in the graph below:

Concho Resources Inc. Price and EPS Surprise

Concho Resources Inc. Price and EPS Surprise

Concho Resources Inc. price-eps-surprise | Concho Resources Inc. Quote

Stocks to Consider

While earnings outperformance looks uncertain for Concho Resources, here are some firms worth considering from the energy space on the basis of our model, which shows that these have the perfect combination of ingredients to deliver a positive surprise this reporting cycle:

National Oilwell Varco, Inc. (NOV - Free Report) has an Earnings ESP of +8.10% and is #3 Ranked at present. The company is scheduled to release earnings on Jul 27.

Helmerich Payne, Inc. (HP - Free Report) has an Earnings ESP of +2.03% and is presently a #3 Ranked player. The firm is scheduled to release earnings on Jul 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

Oceaneering International, Inc. (OII - Free Report) has an Earnings ESP of +26.39% and a Zacks Rank of 3, currently. The company is scheduled to release earnings on Jul 29.

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