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Can Range Resources (RRC) Surprise this Earnings Season?

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Range Resources Corporation (RRC - Free Report) is expected to report second-quarter 2016 earnings on Jul 26, after the market closes.

In the last quarter, the company’s adjusted loss came in at 22 cents a share, narrower than the Zacks Consensus Estimate of a loss of 26 cents. The company reported earnings of 12 cents a share in the year-earlier quarter.

Let’s see how things are shaping up for this announcement.

Factors Likely to Affect Earnings

Range Resources’ diversified asset portfolio is spread between low-risk/long reserve life Appalachian assets and large volume/rapid payout Gulf Coast properties. The company has an impressive inventory in the Marcellus Shale – one of the prominent emerging shale plays in the U.S. lower 48. The company is advantageously positioned to benefit from these projects, which in turn, should boost its earnings.

Given its dominant position in the Marcellus Shale play and its continuous endeavor to control costs, we believe that Range Resources will be capable of shareholder value creation.

RANGE RESOURCES Price and EPS Surprise

RANGE RESOURCES Price and EPS Surprise | RANGE RESOURCES Quote

However, in our opinion, the Marcellus Shale properties are primarily over pressured, with some areas containing rich gas that needs to be processed further. As such, Range Resources requires more capital and new high-pressured lines to gather Marcellus gas.

Earnings Whispers

Our proven model does not conclusively show that Range Resources is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Earnings ESP for Range Resources is -17.24% as the Most Accurate estimate stands at a loss of 34 cents, while the Zacks Consensus Estimate is pegged at a loss of 29 cents.

Zacks Rank: Range Resources carries a Zacks Rank #2. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the same space, which according to our model, have the right combination of elements to post an earnings beat this quarter:

Spectra Energy Corp. (SE - Free Report) has an Earnings ESP of +40.00% and a Zacks Rank #1. The company is slated to release earnings on Aug 3.

Enterprise Products Partners LP (EPD - Free Report) has an Earnings ESP of +3.13% and a Zacks Rank #3. The company is slated to release earnings on Jul 28.

Hess Corporation (HES - Free Report) has an Earnings ESP of +2.42% and a Zacks Rank #3. The company is slated to release earnings on Jul 27.

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