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HighPoint (HPR) Gears Up for Q3 Earnings: What's in Store?

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HighPoint Resources Corporation (HPR - Free Report) is scheduled to report third-quarter 2020 results on Nov 6, before the opening bell.

In the last reported quarter, the upstream energy company’s earnings of $2 per share were in line with the Zacks Consensus Estimate but marked an improvement from the year-ago loss of $3.50. The firm beat earnings estimates twice in the trailing four quarters, missed once and met on another occasion, delivering an average surprise of 10.8%.

HighPoint Resources Corp Price and EPS Surprise

HIGHPOINT RESOURCES CORP Price and EPS Surprise

HIGHPOINT RESOURCES CORP price-eps-surprise | HIGHPOINT RESOURCES CORP Quote

Let’s see how things have shaped up prior to the earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter earnings per share of $3.25 has witnessed no upward movement but one downward revision by firms in the past 30 days. This estimate is indicative of a 316.7% increase from the year-ago reported figure.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $61 million, suggesting a decline of 49.7% from the year-ago reported figure.

Factors to Note

Being primarily involved in the exploration and production of oil and natural gas, HighPoint’s earnings and revenues are directly related to commodity prices. As the demand for energy products was destroyed by the coronavirus pandemic, commodity prices were significantly lower in the third quarter than the year-ago period. Per data provided by the U.S. Energy Information Administration (“EIA”), average WTI crude price was recorded at $40.71, $42.34 and $39.63 per barrel for July, August and September 2020, respectively. The prices were considerably lower than the respective year-ago figures of $57.35, $54.81 and $56.95 per barrel. HighPoint’s third-quarter total production is expected to comprise 56% crude. Thus, the year-over-year decline in crude price is expected to have affected the company’s profits.

Due to the low prices, it is expected to have avoided any additional drilling and completion activities at its assets in the third quarter. HighPoint’s production is expected in the range of 2.5-2.6 million barrels of oil equivalent (MMBoe) for the third quarter, signaling a decline from the year-ago level of 3.4 MMBoe. However, the Zacks Consensus Estimate for average realized natural gas price (before hedging) is pegged at $1.33 per thousand cubic feet, signaling an increase from the year-ago figure of $1.03.

Hence, increased natural gas prices might have aided the company’s profit levels. However, lower overall quarterly output and decreased crude prices might have offset the positives.

What the Quantitative Model Suggests

Our proven model does not conclusively predict an earnings beat for HighPoint this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: It has an Earnings ESP of -7.69%. This is because the Most Accurate Estimate for the quarter is currently pegged at $3, higher than the Zacks Consensus Estimate of $3.25 per share. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: HighPoint currently carries a Zacks Rank #3.

Stocks That Warrant a Look

Here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Canadian Natural Resources Limited (CNQ - Free Report) has an Earnings ESP of +12.50% and is a Zacks #3 Ranked player. The company is scheduled to release third-quarter results on Nov 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cheniere Energy, Inc. (LNG - Free Report) has an Earnings ESP of +13.66% and holds a Zacks Rank #1. It is set to report third-quarter results on Nov 6.

Earthstone Energy, Inc. (ESTE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank of 2. It is scheduled to report third-quarter results on Nov 5.

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