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Devon Energy (DVN) Q3 Earnings: Stock Likely to Beat Again
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We expect Devon Energy Corp. (DVN - Free Report) to beat expectations when it reports third-quarter 2016 results after the market closes on Nov 1.
Last quarter, this independent energy company reported a positive earnings surprise of 127.27%. It is worth noting that Devon Energy has outperformed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 44.08%.
Let’s see how things are shaping up prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Devon Energy 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 Devon Energy has the right mix.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate of 6 cents and the Zacks Consensus Estimate of 5 cents, is +20.00%. This is a meaningful and leading indicator of a likely positive surprise.
Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Devon Energy currently carries a Zacks Rank #2. The combination of Devon Energy’s favorable Zacks Rank and positive ESP makes us reasonably confident of a 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.
Factors to Consider
Devon Energy’s midstream division, EnLink Midstream, is expected to generate cash distributions of $270 million in 2016, thereby providing better visibility on its third-quarter cash flows.
Earlier, in the second quarter, the company raised its capital investment by approximately $200 million to a range of $1.1 – $1.3 billion for 2016. In line with management’s expectation, the company must have deployed this entire incremental capital investment in its franchise assets– STACK and Delaware Basin, during the third quarter.
The company will also benefit from the ongoing cost saving initiatives, which is expected to fuel margins in the to-be-reported quarter amid the challenging commodity price environment.
During the third quarter, Devon Energy announced that it will sale its 50% ownership interest in Access Pipeline to Wolf Midstream Inc. The completion of this deal, which took place at the very onset of this month, brought the total asset sale proceeds for the company to $3.2 billion; thereby comfortably surpassing its divestiture target of $2–$3 billion for 2016. Devon Energy will use these proceeds to strengthen its balance sheet and deploy more funds in the resource-rich U.S. plays, including the STACK and Delaware Basins, to reap higher benefits.
Other Stocks to Consider
Devon Energy is not the only energy company looking up this earnings season. We see likely earnings beats coming from the following companies as well:
Approach Resources, Inc. has an Earnings ESP of +4.17% and a Zacks Rank #3. The company is expected to release third-quarter 2016 results on Nov 2.
Cobalt International Energy, Inc. has an Earnings ESP of +20.00% and a Zacks Rank #3. The company is expected to release third-quarter 2016 results on Nov 1.
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
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Devon Energy (DVN) Q3 Earnings: Stock Likely to Beat Again
We expect Devon Energy Corp. (DVN - Free Report) to beat expectations when it reports third-quarter 2016 results after the market closes on Nov 1.
Last quarter, this independent energy company reported a positive earnings surprise of 127.27%. It is worth noting that Devon Energy has outperformed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 44.08%.
Let’s see how things are shaping up prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Devon Energy 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 Devon Energy has the right mix.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate of 6 cents and the Zacks Consensus Estimate of 5 cents, is +20.00%. This is a meaningful and leading indicator of a likely positive surprise.
DEVON ENERGY Price and EPS Surprise
DEVON ENERGY Price and EPS Surprise | DEVON ENERGY Quote
Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Devon Energy currently carries a Zacks Rank #2. The combination of Devon Energy’s favorable Zacks Rank and positive ESP makes us reasonably confident of a 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.
Factors to Consider
Devon Energy’s midstream division, EnLink Midstream, is expected to generate cash distributions of $270 million in 2016, thereby providing better visibility on its third-quarter cash flows.
Earlier, in the second quarter, the company raised its capital investment by approximately $200 million to a range of $1.1 – $1.3 billion for 2016. In line with management’s expectation, the company must have deployed this entire incremental capital investment in its franchise assets– STACK and Delaware Basin, during the third quarter.
The company will also benefit from the ongoing cost saving initiatives, which is expected to fuel margins in the to-be-reported quarter amid the challenging commodity price environment.
During the third quarter, Devon Energy announced that it will sale its 50% ownership interest in Access Pipeline to Wolf Midstream Inc. The completion of this deal, which took place at the very onset of this month, brought the total asset sale proceeds for the company to $3.2 billion; thereby comfortably surpassing its divestiture target of $2–$3 billion for 2016. Devon Energy will use these proceeds to strengthen its balance sheet and deploy more funds in the resource-rich U.S. plays, including the STACK and Delaware Basins, to reap higher benefits.
Other Stocks to Consider
Devon Energy is not the only energy company looking up this earnings season. We see likely earnings beats coming from the following companies as well:
Approach Resources, Inc. has an Earnings ESP of +4.17% and a Zacks Rank #3. The company is expected to release third-quarter 2016 results on Nov 2.
Cobalt International Energy, Inc. has an Earnings ESP of +20.00% and a Zacks Rank #3. The company is expected to release third-quarter 2016 results on Nov 1.
Apache Corp. (APA - Free Report) is expected to release third-quarter 2016 results on Nov 3. The company has an Earnings ESP of +7.14% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>