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What's in the Offing for Weatherford (WFT) in Q2 Earnings?

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Leading oilfield services company Weatherford International Ltd. (WFT - Free Report) is expected to report second-quarter 2017 earnings results, before the opening bell on Jul 28.

The company has a mixed earnings history. Weatherford beat the Zacks Consensus Estimate in two and missed the same in the other two of the trailing four quarters. In the last reported quarter, the company saw a negative earnings surprise of 3.23%.   

Factors at Play

The commodity pricing scenario did not show any improvement in the second quarter. Oil and gas prices have been low for almost three years now and prices slipped further during second-quarter 2017. The prolonged weakness can be attributed to a persistent supply glut in the commodity market.

During the April-to-June quarter of this year, oil and natural gas prices fell 8.4% and 5%, respectively. Hence, the OPEC’s historical production cut extension deal until Mar 2018 has failed to drive oil. Natural gas is also an oversupplied commodity as is reflected by its inventory level of 2.816 tcf – as of Jun 23 – almost 7% higher than the five-year average mark (as per The U.S. Energy Information Administration).  

Weak commodity prices could significantly lower oilfield service contracts for Weatherford. Also, the company is laden with huge debt load as is reflected by the rise in its long-term debt to $7,400 million from nearly $5,900 million during 2016. Also, cash balances plunged more than 47% in the last quarter. Hence, plummeting cash balances along with huge debt load reflect balance sheet weakness.

Q2 Price Performance

During the quarter, Weatherford lost 41.8% value as compared to the 20.3% decline of its industry.

Earnings Whispers

Our proven model does not conclusively show that Weatherford is likely to beat earnings 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) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Earnings ESP for the company is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 28 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: Weatherford carries a Zacks Rank #4 (Sell). Please note that we caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the energy sector that, according to our model, have the right combination of elements to post an earnings beat this quarter: 

Boardwalk Pipeline Partners LP (BWP - Free Report) has an Earnings ESP of +6.90% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada Corporation (TRP - Free Report) has an Earnings ESP of +7.84% and a Zacks Rank #1.

C&J Energy Services Inc. (CJ - Free Report) has an Earnings ESP of +100.00% and a Zacks Rank #3.

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