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Will Q3 Earnings Hold a Surprise for SeaDrill (SDRL) Stock?

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Leading contract driller SeaDrill Ltd. (SDRL - Free Report) is set to release its third-quarter 2016 results on Tuesday, Nov 22.

In the preceding three-month period, the company delivered a positive earnings surprise of 43.90% due to lower operating expenses.

In terms of earnings surprise history, SeaDrill has a mixed record. It beat estimates in two of the last four quarters.

SEADRILL LTD Price and EPS Surprise


SEADRILL LTD Price and EPS Surprise | SEADRILL LTD Quote

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

Factors to Consider This Quarter

SeaDrill is one of the leading offshore drilling contractors in the world with one of the youngest but most advanced fleets. The company has a strong backlog of $3.6 billion, which not only reflects steady demand from its customers but also offers an unmatched level of earnings and cash flow visibility. Moreover, SeaDrill has high economic utilization for its floaters, which is expected to help it maintain a steady flow of income.

However, SeaDrill derives its revenues from companies in the oil and gas exploration and production industry, a highly volatile and cyclical sector that is directly exposed to commodity price fluctuations. The weak commodity prices are likely to hurt the company’s near-term business to a considerable extent.

Earnings Whispers

Our proven model does not conclusively show that SeaDrill 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. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

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 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at 20 cents.

Zacks Rank: SeaDrill has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% 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 SeaDrill, 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:

Burlington Stores Inc. (BURL - Free Report) has an Earnings ESP of +6.06% and a Zacks Rank #2. The company is expected to release earnings results on Nov 22. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EVINE Live Inc. (EVLV - Free Report) has an Earnings ESP of +25.00% and a Zacks Rank #2. The company is anticipated to release earnings on Nov 22.

Supernus Pharmaceuticals Inc. (SUPN - Free Report) has an Earnings ESP of +30.77% and a Zacks Rank #3. The company is likely to release earnings on Nov 22.

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