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Can EQT Corp (EQT) Pull a Surprise this Earnings Season?

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Integrated energy company EQT Corporation (EQT - Free Report) is expected to report second-quarter 2016 earnings on Apr 28.

EQT CORP Price and EPS Surprise

In the last quarter, the company reported earnings of $0.07 per share. The Zacks Consensus Estimate was of a loss of $0.05 per share. The company outpaced the Zacks Consensus Estimate in three of the last four quarters.

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

Factors Likely to Influence this Quarter

EQT is a low-cost producer with a strategic midstream presence. The company's superior cost structure and above-average growth may ease concerns about struggling natural gas prices.

EQT has reduced its full year exploration and production capital spending to $1 billion from $1.8 billion spent in 2015, owing to lower well costs. Despite this, the company has maintained its initial production guidance, which reflects its efficiency. The company’s prudent strategic moves and operational efficiency should further support growth.

However, EQT Corp. is engaged in upstream operations, which exposes it to commodity price fluctuations. Low realizations affected the company’s revenues and earnings, which declined sharply from the prior-year quarter levels. With natural gas prices remaining weak, this trend is likely to continue in the to-be-reported quarter as well.

Also, EQT lacks geographical diversification as its resources are concentrated in the Appalachian Basin. This increases the company’s risk as any disruptions in the region will affect its financials.

Earnings Whispers

Our proven model does not conclusively show that EQT Corp. will beat estimates 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 a likely beat. That is not the case here as you will see below.
 
Zacks ESP: EQT has an ESP of -4.26% for the second quarter. This is because the Most Accurate estimate of a loss of 49 cents is wider than the Zacks Consensus Estimate of a loss of 47 cents.

Zacks Rank: EQT currently carries a Zacks Rank #2. Though a favorable Zacks Rank increases the predictive power of ESP, a 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 in the energy sector that investors may consider, as our model shows that they have the right combination of elements to beat estimates this quarter:

Anadarko Petroleum Corporation has an Earnings ESP of +1.30% and a Zacks Rank #2. The company is likely to release earnings results on Jul 26.

Legacy Reserves LP has an Earnings ESP of +31.58% and a Zacks Rank #1. The partnership is expected to release earnings results on Aug 3.

Noble Energy Inc. has an Earnings ESP of +6.25% and a Zacks Rank #2. The company is expected to release earnings results on Aug 3.

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