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Pioneer Natural (PXD) Q1 Earnings: Is a Beat in the Cards?

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Independent oil and gas exploration and production company, Pioneer Natural Resources Company (PXD - Free Report) is expected to report first-quarter 2017 earnings after the closing bell on May 3.

Last quarter, the company posted a positive earnings surprise of 63.33%. We note that Pioneer Natural has outperformed the Zacks Consensus Estimate in three of the preceding four quarters with an average positive surprise of 21.86%.   

Let’s see how things are shaping up prior to the announcement.

Earnings Whispers

Our proven model shows that Pioneer Natural is likely to beat on earnings this time because it has the right combination of two key ingredients.  

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +7.14%. This is because the Most Accurate estimate stands at 15 cents, while the Zacks Consensus Estimate is pegged at 14 cents. This is very meaningful and a leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Pioneer Natural carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings. The combination of Range Resources’ favorable Zacks Rank and a positive Earnings ESP makes us confident about an earnings beat.

Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.  

Factors to Consider this Quarter

Last November, OPEC and non-OPEC oil producing members decided to curb crude output, which led to commodity price improvement. Following the increase in oil prices, Pioneer Natural has been able to sell the commodity at higher prices. Moreover, Pioneer Natural has been able to significantly reduce expenses related to oil and gas production activities during 2016. The success on this front reflects the company’s consistent efficiency gains and cost-reduction initiatives and should prove favorable for the first-quarter earnings.

Pioneer Natural expects production growth between 15% and 18% in 2017. The raised guidance indicates improving Spraberry/Wolfcamp well productivity. For the first quarter, the company expects production to average 243 MBOE/d–248 MBOE/d compared with 222 MBOE/d in the year-ago comparable quarter.

Pioneer Natural’s strong financial position is reflected by its debt-to-capitalization ratio of 23.6%.  We also appreciate the company’s focus on the Permian Basin. The company has considerable interest in the basin, which is among the lucrative oil shale plays with less risk for operation. These positives are expected to be reflected in the upcoming quarter results.

In the last three months, Pioneer Natural’s shares outperformed the Zacks categorized Oil & Gas-U.S Exploration & Production industry. During the aforesaid period, the company’s shares lost 4.2% compared with 14.1% decrease for the broader sector. Moreover, the company beat the Zacks Consensus Estimate in three of the last four quarters with an average positive earnings surprise of 21.86%. It remains to be seen how the company’s shares perform after the first-quarter earnings announcement.

Stocks to Consider

Here are some firms that have the right combination of elements to post an earnings beat this quarter:

Enterprise Products Partners, LP EPD is expected to release earnings on May 2. The partnership has an Earnings ESP of +3.13% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chesapeake Energy Corp. CHK has an Earnings ESP of +5.26% and a Zacks Rank #3. The company is expected to release earnings on May 4.

Cimarex Energy Co. XEC has an Earnings ESP of +1.19% and a Zacks Rank #3. The partnership is expected to release earnings on May 8.

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