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Helmerich & Payne (HP) to Post Q4 Earnings: What to Expect?

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Contract drilling services provider Helmerich & Payne Inc. (HP - Free Report) is set to release its fiscal fourth-quarter 2016 results before the opening bell on Thursday, Nov 17.

In the preceding three-month period, the Tulsa, OK-based company reported wider-than-expected loss owing to dismal performances by all its segments.

Coming to earnings surprise history, Helmerich & Payne has a bad record: its missed estimates in three of the last four quarters.

HELMERICH&PAYNE Price and EPS Surprise

 

HELMERICH&PAYNE Price and EPS Surprise | HELMERICH&PAYNE Quote

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

Factors to Consider This Quarter

Helmerich & Payne is a major land and offshore drilling contractor in the western hemisphere, having the youngest and most efficient drilling fleet. The company specializes in shallow to deep drilling in oil and gas-producing basins of the U.S. and in drilling for oil and gas in international locations.

The company’s technologically advanced FlexRigs are the key to its success, helping it to maintain relatively strong daily-rate margins even during market uncertainty. The company’s proprietary FlexRig design makes the rigs move faster than conventional rigs, drill quicker and more efficiently, and allows for a safer operating environment.

As such, these are better suited for the new requirements of the exploration business and, therefore, command higher dayrates and utilization than rigs from other land drillers. In fact, the company projected a slight improvement in average rig margin per day.

However, oil prices are still languishing under $45 – about half the level of two years ago – and far below the breakeven price for many energy companies. As a result, the top energy companies continue to cut spending (particularly on the costly upstream projects) on the back of lower profit margins. This, in turn, means less work for contract drillers like Helmerich & Payne. 

The pace of new term contract orders have weakened considerably while newbuild awards have also been hard to come by due to flat rig demand and stiff price competition. This will continue to weigh on Helmerich & Payne’s fortunes in the near-to-medium term.

Earnings Whispers

Our proven model does not conclusively show that Helmerich & Payne 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) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -11.63%. This is because the Most Accurate estimate stands at a loss of 48 cents, while the Zacks Consensus Estimate is pegged narrower, at a loss of 43 cents.

Zacks Rank: Helmerich & Payne has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult. 

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for Helmerich & Payne, here are some firms from diverse sectors you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

Marvell Technology Group Ltd. (MRVL - Free Report) has an Earnings ESP of +40.00% and a Zacks Rank #1. The company is expected to release earnings results on Nov 17. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Best Buy Co. Inc. (BBY - Free Report) has an Earnings ESP of +4.26% and a Zacks Rank #2. The company is anticipated to release earnings on Nov 17.

Foot Locker Inc. (FL - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #2. The company is likely to release earnings on Nov 18.

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