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Is a Beat in the Cards for Hess (HES) This Earnings Season?

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Hess Corporation (HES - Free Report) is set to report second-quarter 2021 results on Jul 28, before the opening bell.

In the last reported quarter, the leading global independent energy company reported adjusted earnings per share of 82 cents, beating the Zacks Consensus Estimate of 44 cents, largely backed by higher price realizations of commodities.

Markedly, the company beat the consensus estimate in three of the prior four quarters and met once, with the average earnings surprise being 27.7%. This is depicted in the graph below:

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

Trend in Estimate Revision

The Zacks Consensus Estimate for earnings of 23 cents per share has seen one upward estimate revision and two downward movements over the past 60 days. The estimated figure suggests a surge of 121.9% from the prior-year reported number.

The Zacks Consensus Estimate for revenues of $1.5 billion indicates a 78.6% improvement from the prior-year quarter.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Hess this time around as well. 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.

Earnings ESP: The company has an Earnings ESP of +18.52%. This is because the Most Accurate Estimate for the quarter’s earnings is 27 cents per share while the Zacks Consensus Estimate is at 23 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Hess currently carries a Zacks Rank #2.

Factors Driving the Better-Than-Expected Earnings

The price of West Texas Intermediate crude improved more than 20% in the June quarter of this year. In comparison with the year-ago quarter, the commodity price has improved drastically. The scale of the improvement can be represented as a price surge from the pandemic-hit low mark – when oil was in the negative territory – in April 2020, to breaking the psychological barrier of $70 per barrel. Like oil, natural gas price too improved drastically in the June quarter, year over year.

The significant improvement in the commodity pricing scenario was backed by the optimism that fuel demand will recover considerably this year, thanks to the rolling out of coronavirus vaccines at a massive scale.

The favorable commodity pricing scenario is likely to have aided Hess’ overall business in the June quarter. The positive is expected to have been offset partially by lower production. This is because the company is focusing more on allocating cashflows for debt reductions and returning capital back to shareholders. The Zacks Consensus Estimate for net oil equivalent production volumes is pegged at 297 thousand barrels of oil equivalent per day (MBoe/d), indicating a decline from the year-ago level of 341 MBoe/d.  

Other Stocks That Warrant a Look

Here are some other firms in the energy space that you may want to consider as these too have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Enterprise Products Partners LP (EPD - Free Report) has an Earnings ESP of +0.58% and a Zacks Rank of 3. It is scheduled to report second-quarter results on Jul 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

EQT Corporation (EQT - Free Report) has an Earnings ESP of +29.63% and is a Zacks #3 Ranked player. The company is slated to report second-quarter results on Jul 28.

Range Resources Corporation (RRC - Free Report) has an Earnings ESP of +3.51% and is Zacks #1 Ranked. The firm is scheduled to release earnings on Jul 26.