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What's in the Offing for Concho (CXO) this Earnings Season?

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Concho Resources Inc. (CXO - Free Report) , a more than $20-billion market cap energy company, is set to release fourth-quarter 2017 financial results after the closing bell on Feb 20, 2018.

Last quarter, the company had delivered an impressive 73.1% positive earnings surprise. As far as earnings beat is concerned, the company has an excellent history. Over the trailing four quarters, it delivered an average positive surprise of 118.6%. Let’s see, how things are shaping up for this announcement.

 

Factors Likely to Influence This Quarter

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

The Zacks Consensus Estimate of daily production for this Midland, TX-based upstream operator, currently pegged at 204 thousand barrels of oil equivalent (MBOE), is up from 193.2 MBOE, reported in the third quarter and 164.3 MBOE in the year-ago period.

Analysts polled by Zacks also envision realized prices to increase year over year at Concho Resources, which may further buoy the company’s top line. The Zacks Consensus Estimate for average natural gas price is expected to jump 31.8% from the year-ago quarter to $2.94 per thousand cubic feet while the consensus mark for average oil price realization is set to go up 27.8% year over year to $51 per barrel.

However, the Zacks Consensus Estimate of $125 million for natural gas sales in the fourth quarter is lower than last quarter’s $129 million, which might affect the overall revenues.  

Earnings Whispers

Our proven model does not conclusively show that Concho Resources is likely to beat 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. However, this is not the case here as elaborated below.

Zacks ESP: Concho Resource has an Earnings ESP of -1.66% as the Most Accurate estimate is pegegd lower at 45 cents than the Zacks Consensus Estimate of 46 cents. The Earnings ESP represents the difference between both estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Concho Resources has a Zacks Rank #1, which increases the predictive power of ESP. However, a company needs a positive ESP to be confident about an earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some other companies worth considering as our model shows that these have the right combination of elements to beat on earnings this quarter.

Houston, TX-based EOG Resources (EOG - Free Report) is an upstream company. It has an Earnings ESP of +4.06% and a Zacks Rank of 1. It is expected to report fourth-quarter results on Feb 28, 2018.

WildHorse Resource Development Corporation (WRD - Free Report) , based in Houston, TX, is an independent oil and natural gas exploration and production company. It has an Earnings ESP of +4.55% and a Zacks Rank #1. It is slated to release fourth-quarter financial numbers on Mar 7, 2018.

Dallas, TX-based RSP Permian, Inc. is an upstream company with an Earnings ESP of +1.64% and a Zacks Rank #1. It is scheduled to announce fourth-quarter earnings on Feb 27, 2018.

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