Ovintiv Inc. OVV is set to release fourth-quarter 2019 results after the closing bell on Wednesday, Feb 19. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 81 cents per share on revenues of $1.9 billion.
Let’s delve into the factors that might have influenced the company’s performance in the December quarter. But it’s worth taking a look at Ovintiv’s previous quarter performance first.
Highlights of Q3 Earnings & Surprise History
In the last reported quarter, the Denver, CO-based company beat the consensus mark on expanded production volumes in the Permian and Anadarko Basins. Ovintiv reported operating earnings of 75 cents per share that surpassed the Zacks Consensus Estimate by 5 cents. However, the bottom line was lower than the year-ago figure of 85 cents due to modest crude oil price realizations. Meanwhile, total revenues came in at $1.9 billion, surpassing the Zacks Consensus Estimate of $1.7 million and also increasing from the year-ago level of $1.26 billion.
As far as earnings surprises are concerned, the oil and natural gas producer – earlier known as Encana – is on an excellent footing, having gone past the Zacks Consensus Estimate in each of the last four reports, with the average positive surprise being 49.81%. This is depicted in the graph below:
Factors to Consider This Quarter
Following the $7.7-billion Newfield buyout in February, Ovintiv has successfully repositioned the asset base to focus on its Core 3 liquids plays, namely Permian, Anadarko and Montney, with enviable production growth prospects. In the third quarter, the company’s total output of crude oil and natural gas increased 4.3% compared with last year’s corresponding period to 605,100 barrels of oil equivalent per day (BOE/d), , a trend that most likely continued in the fourth quarter because of higher production from its core assets.
However, the positive effect of production gain was likely offset by lower realized natural gas prices. Despite the transition to crude, natural gas still constitutes nearly half of Ovintiv's total production. Therefore, with the commodity hovering below $2.5 for most of the fourth quarter, depressed natural gas realizations might have dampened the performance of the company.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Ovintiv is likely to beat estimates in the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company stands at -5.52%.
Zacks Rank: Ovintiv has a Zacks Rank of 3.
Stocks to Consider
While earnings beat looks uncertain for Ovintiv, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this season:
Sunoco LP SUN has an Earnings ESP of +3.35% and a Zacks Rank #1. The partnership is scheduled to release earnings on Feb 19.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cimarex Energy Co. XEC has an Earnings ESP of +1.25% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb 19.
QEP Resources, Inc. has an Earnings ESP of +15.79% and is Zacks #3 Ranked. The company is scheduled to release earnings on Feb 26.
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