We expect integrated oil & gas company Occidental Petroleum Corporation (OXY Quick QuoteOXY - Free Report) to beat expectations when it reports second-quarter 2016 results on Aug 3, before the market opens. Last quarter, the company reported a negative earnings surprise of 36.59%.

Why a Likely Positive Surprise?

Our proven model shows that Occidental Petroleum is likely to beat estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates and Occidental Petroleum has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate of a loss of 19 cents and the Zacks Consensus Estimate of a loss of 20 cents, is +5.00%. This is meaningful and a leading indicator of a likely positive earnings surprise.

Zacks Rank: Occidental Petroleum currently carries a Zacks Rank #3, which when combined with a positive ESP, makes us fairly confident of positive surprise this season.

Conversely, we caution against Sell-rated stocks (#4 or #5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What’s Driving the Better-than-Expected Earnings?

In the second quarter, oil prices rebounded from two-year lows, which will likely drive Occidental Petroleum’s bottom line. The company expects total Oil and Gas production to increase to a range between 600,000-610,000 barrels of oil equivalent per day in the second quarter as Al Hosn and Dolphin resumed operations.

However, intense competition from other oil and gas companies and signs of another round of weakness in oil prices may dent the company’s production growth and targeted returns.

Other Stocks to Consider

Occidental Petroleum is not the only company looking up this earnings season. We see likely earnings beats coming from these companies in the oil & energy space as well:

Chesapeake Energy Corporation (CHK Quick QuoteCHK - Free Report) has an Earnings ESP of +10.00% and a Zacks Rank #2. It is scheduled to report earnings on Aug 4.

Devon Energy Corporation (DVN Quick QuoteDVN - Free Report) has an Earnings ESP of +4.55% and a Zacks Rank #2. It is expected to report earnings on Aug 2.

Northern Oil and Gas, Inc. (NOG Quick QuoteNOG - Free Report) has an Earnings ESP of +20.00% and a Zacks Rank #1.It is slated to report earnings on Aug 4.

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