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Canadian Natural Resources (CNQ) Q2 Earnings: Beat in Store?

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Independent oil and gas explorer Canadian Natural Resources Limited (CNQ - Free Report) is set to release its second-quarter 2017 results before the opening bell on Aug 3.

In the preceding three-month period, the Calgary, Alberta-based upstream player reported profit of 18 cents beating the Zacks consensus Estimate of 13 cents. Well executed projects along with a strong portfolio helped Canadian Natural resources to post solid results in the preceding quarter. However, the company posted a negative earnings surprise of 275.46% in the trailing four quarters.Let’s see how things are shaping up for this announcement.

Canadian Natural Resources Limited Price and EPS Surprise


What the Zacks Model Unveils?

Our proven model shows that Canadian Natural Resources is likely to beat estimates this quarter because it has the right combination of two key ingredients.

Zacks ESP: The Earnings ESP for Canadian Natural Resources is +19.05% because the Most Accurate Estimate of 25 cents is pegged higher than the Zacks Consensus Estimate of 21 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Canadian Natural Resources currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Note that stocks with a Zacks Rank #1, 2(Buy) or 3 have a significantly higher chance of beating estimates. Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

Factors at Play

Canadian Natural Resources – which considers Encana Corporation (ECA - Free Report) as one of its peers – is engaged in the acquisition, development and exploitation of crude oil and natural gas properties. The company has a strong and diverse production base with long-life and low decline rate assets.

Canadian Natural Resources’ business is directly linked to oil and gas prices. The pricing scenario for oil and gas has improved from the year-ago quarter and from themulti-year lows reached in 2016. This is a favorable development for Canadian Natural Resources as we expect the company to be able to sell the increased output at higher prices. This, in turn, is expected to boost the company’s second-quarter results.

It has a healthy balance sheet with enough cash in hand and manageable leverage. This provides the company with ample flexibility to make acquisitions or grow internally. Moreover, driven by operational efficiencies, Canadian Natural Resources has been able to reduce operating costs over 40%. Better pricing scenario and decline in costs are likely to result into significant cash savings.

In March, the company concluded the acquisition of Athabasca oil sands project, with the ownership of 70% interest. Additional cash flows from the project are expected to improve the fundamentals. Other partners in the project include Chevron Canada and Shell Canada – subsidiaries of Chevron Corporation (CVX - Free Report) and Royal Dutch Shell plc (RDS.A - Free Report) respectively.

Shares of Canadian Natural Resources have outperformed the industry in the second quarter. During the aforesaid period, shares of the company lost 12% compared a 17% decline of the broader industry.

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