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Will Cabot (COG) Disappoint Investors this Earnings Season?

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Upstream Energy firm Cabot Oil & Gas Corporation (COG - Free Report) is set to report second-quarter 2017 results before the opening bell on Jul 28.

Headquartered in Texas, Cabot is independent oil and gas exploration company with producing properties mainly in the continental U.S. Cabot has a dismal earnings surprise history. The company reported an average negative earnings surprise of 0.89% in the trailing four quarters.

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

Cabot Oil & Gas Corporation Price and EPS Surprise

 

Factors at Play

Being an upstream firm, weakness in the commodity prices might lower exploration and production activities. During the second quarter, the price of oil and natural gas declined by 8.4% and 5%, respectively. With natural gas prices trading barely above $3 per MMBtu during most part of the second quarter and Cabot being one of the most gas-weighted E&Ps, the company's earnings and revenues are under pressure.

High capital spending and project delays are also major causes for concern. Cabot is likely to spend $845 million in 2017 more than twice of the 2016 spending level of around $375 million. This might lower the company's cash flows. Further, the company’s much criticized Constitution Pipeline project is grappling with lawsuits and is expected to get substantially delayed or even cancelled. This also accounts for our bleak earnings outlook for the company.

Earnings Whispers

Our proven model does not conclusively show that Cabot is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. 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 -6.25%. This is because the Most Accurate estimate is 15 cents, while the Zacks Consensus Estimate is pegged at 16 cents.

Zacks Rank: Cabot currently carries a Zacks Rank #4. Note that 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.

StocksWith Favorable Combination

While an earnings beat looks uncertain for Cabot, here are some firms in the energy space that you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.

Diamond Offshore Drilling, Inc. (DO - Free Report) has an Earnings ESP of +12.5% and a Zacks Rank #3. The company is expected to release earnings on Jul 31. You can see the complete list of today’s Zacks #1 Rank stocks here.

Noble Corporation (NE - Free Report) has an Earnings ESP of +6.06% and a Zacks Rank #3. The company is likely to release earnings on Aug 3.

Rowan Companies plc (RDC - Free Report) has an Earnings ESP of +21.88% and a Zacks Rank #3. The company is expected to release earnings on Aug 2.

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