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Liberty's (LBRT) Q4 Earnings Preview: Key Things To Consider

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Liberty Energy (LBRT - Free Report) is set to release fourth-quarter results on Jan 25. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 71 cents per share on revenues of $1.2 billion.

Let’s delve into the factors that might have influenced the provider of hydraulic fracturing and other auxiliary services to onshore exploration and production companies in North America in the December quarter. But it’s worth taking a look at LBRT’s previous-quarter performance first.

Highlights of Q3 Earnings & Surprise History

In the last-reported quarter, the Denver, CO-based oilfield service company beat the consensus mark due to the impact of strong execution, higher activity and increased service pricing, LBRT had reported earnings per share of 78 cents, 15 cents higher than the Zacks Consensus Estimate. Revenues of $1.2 billion generated by the firm also came in above the Zacks Consensus Estimate of $1 billion.

LBRT beat the Zacks Consensus Estimate in three of the last four quarters, which resulted in an earnings surprise of 58.5%, on average. This is depicted in the graph below:

Liberty Energy Inc. Price and EPS Surprise

Liberty Energy Inc. Price and EPS Surprise

Liberty Energy Inc. price-eps-surprise | Liberty Energy Inc. Quote

Trend in Estimate Revision

The Zacks Consensus Estimate for the fourth-quarter bottom line has remained unchanged in the past seven days. The estimated figure indicates a 336.7% jump year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 74.7% increase from the year-ago period.

Factors to Consider

Despite growing risk in financial markets due to the aggressive monetary tightening by central banks and the fallout from China’s zero-COVID lockdown policy, Liberty management believes that the energy market remains tight. On top of this, the OPEC+ supply cut, sanctions on Russian oil and limited availability of spare production capacity are likely to further strengthen the demand for North American energy.

This means that upstream operators are drilling more wells to increase output that has remained depressed over the past two years due to the lack of investment, supply-chain issues, scarcity of labor and equipment attrition. With crude demand set to remain robust and eventually surpass the pre-COVID record, most of the domestic fracking capacity is on the verge of being exhausted. In this context, Liberty management sees elevated demand for its next-generation fleet that supports clients’ requirements for quality and reliability. Notwithstanding holiday and seasonal weather, the company sees fourth-quarter results in line with the strong third quarter.

On a somewhat bearish note, the increase in LBRT’s costs might have dented the company’s to-be-reported bottom line. The company’s third-quarter total operating expenses totaled $1 billion, up 59.4% from the year-ago period. The upward cost trajectory is likely to have continued in the fourth quarter due to the prevailing inflationary environment.

What Does Our Model Say?

The proven Zacks model does not conclusively show that LBRT is likely to beat estimates in the fourth quarter. The combination of a positive Earnings ESP and 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: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -12.40%.

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

Stocks to Consider

While an earnings beat looks uncertain for Liberty, here are some firms from the energy space that you may want to consider on the basis of our model:

Helmerich & Payne (HP - Free Report) has an Earnings ESP of +8.68% and a Zacks Rank #1. The firm is scheduled to release earnings on Jan 30.

You can see the complete list of today’s Zacks #1 Rank stocks here.

For fiscal 2023, Helmerich & Payne has a projected earnings growth rate of 4,380%. Valued at around $5 billion, HP has gained 68.7% in a year.

Valero Energy Corporation (VLO - Free Report) has an Earnings ESP of +1.42% and a Zacks Rank #3. The firm is scheduled to release earnings on Jan 26.

The Zacks Consensus Estimate for VLO’s 2022 earnings has been revised 5.2% upward over the past 90 days. Valued at around $52.3 billion, Valero Energy has gained 67.4% in a year.

Halliburton Company (HAL - Free Report) has an Earnings ESP of +0.30% and a Zacks Rank #2. The firm is scheduled to release earnings on Jan 24.

HAL topped the Zacks Consensus Estimate by an average of 5.5% in the trailing four quarters, including a 7.1% beat in Q3. Halliburton has gained 42.1% in a year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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