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What's in the Offing for Apache (APA) this Earnings Season?

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Domestic energy explorer Apache Corporation (APA - Free Report) is set to release second-quarter 2017 results, before the opening bell on Aug 3.

Founded in 1954, Houston, TX-based Apache – which counts Continental Resources, Inc. (CLR - Free Report) , Anadarko Petroleum Corporation (APC - Free Report) and Concho Resources Inc. (CXO - Free Report) as its peers – is one of the world's leading independent energy companies engaged in the exploration, development, and production of natural gas, crude oil, and natural gas liquids.

In the preceding three-month period, the company reported adjusted loss of 8 cents per share, which compared unfavorably with the Zacks Consensus Estimate of earnings of 16 cents. The underperformance stems from a dip in output due to a conservative capital budget over the last two years.  

Apache’s earnings surprise history is disappointing. The company missed estimates in three of the last four quarters with an average negative surprise of 46.40%.

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

Apache Corporation Price and EPS Surprise


Factors at Play

As compared to the year-ago quarter, the pricing scenario for both crude and natural gas has improved considerably. This bodes well for Apache as it has been able to sell its output at favorable prices.  

However, for second-quarter 2017, Apache expects production in the range of 376–386 thousand barrels of oil equivalent per day (Mboe/d), lower than 460.8 Mboe/d in the year-ago quarter. Hence, lower projected output due to planned maintenance and reduced spending may negatively impact Apache’s earnings. The company’s high leverage is also a concern. As it is, shares of Apache witnessed a decline of around 7% during the quarter.

Earnings Whispers

Our proven model does not conclusively show that Apache 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 estimates. 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 +66.67%. This is because the Most Accurate estimate is pegged at 5 cents, higher than the Zacks Consensus Estimate of 3 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Apache has a Zacks Rank #5 (Strong sell). Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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