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Why Concho Resources (CXO) is Set to Beat in Q3 Earnings

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Independent oil and gas explorer Concho Resources Inc. is scheduled to report its third-quarter earnings on Tuesday, Oct 31, after market closes. The current Zacks Consensus Estimate for the quarter under review is 27 cents on revenues of $623 million.

In the preceding three-month period, the company delivered a positive earnings surprise of 20.93% on higher commodity prices and strong production growth.

As far as earnings surprises are concerned, the Midland, TX-based upstream operator has an excellent history. Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on one occasion, witnessing an average positive surprise of 115.30%. This is depicted in the graph below:

Concho Resources Inc. Price and EPS Surprise

 

Concho Resources Inc. Price and EPS Surprise | Concho Resources Inc. Quote

 

Investors are keeping their fingers crossed and hoping that Concho Resources surpasses earnings estimate even this time. Let’s delve deeper and find out the factors impacting the results.

Factors to Consider This Quarter

We believe that the improving commodity price environment and Concho Resources’ strong production growth bode well.

We note that the Zacks Consensus Estimate of daily production for the company, which is currently pegged at 189.7 thousand barrels of oil equivalent (MBOE), is up from 184.7 MBOE reported in the second quarter and reflects year-over-year growth of 24%.

Analysts polled by Zacks also envision realized prices to increase at Concho Resources, which may further buoy the company’s top-line. The average natural gas price is expected to jump 16.1% from the year-ago quarter to $2.81 per thousand cubic feet, while average oil price realization is set to go up 9.4% to $45.41 per barrel.

What Does Our Model Say?

Our proven model too shows that Concho Resources is likely to beat earnings in the to-be-reported quarter because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP for this company stands at +1.39%. A favorable Zacks ESP serves as a meaningful and 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: Concho Resources carries a Zacks Rank #3 (Hold) which, when combined with a positive ESP, makes us confident of earnings beat.

Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. On the other hand, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Which Other Energy Companies Have Positive Surprise in Store?

Concho Resources is not the only energy firm looking up this earnings season. Here are some companies from the space which, according to our model, also have the right combination of elements to post earnings beat this quarter:

Denbury Resources Inc. has an Earnings ESP of +100% and a Zacks Rank #1. The company is likely to release earnings on Nov 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian Natural Resources Limited (CNQ - Free Report) has an Earnings ESP of +7.46% and a Zacks Rank #2. The partnership is anticipated to release earnings on Nov 2.

National Oilwell Varco Inc. (NOV - Free Report) has an Earnings ESP of +13.04% and a Zacks Rank #3. The company is expected to release earnings results on Oct 26.

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