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Is a Beat in Store for Chesapeake Energy (CHK) in Q4 Earnings?

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Chesapeake Energy Corporation CHK is expected to trump estimates when it releases fourth-quarter 2019 results on Feb 26, before the opening bell.

The oil and gas explorer failed to beat estimates for its bottom line in three of the last four quarters, the negative earnings surprise being 9%, on average. This is depicted in the graph below:

Chesapeake Energy Corporation Price and EPS Surprise


Chesapeake Energy Corporation Price and EPS Surprise

Chesapeake Energy Corporation price-eps-surprise | Chesapeake Energy Corporation Quote

In the last reported quarter, the company reported a loss of 11 cents per share, wider than the Zacks Consensus Estimate of a loss of 10 cents. The underperformance stemmed from a drop in natural gas production volumes, decline in realized commodity prices and higher average production expenses. Let’s see how things have shaped up prior to the announcement.

What is the Estimate Picture Like?

Let’s take a look at the estimate revision trend to get a clear picture of what analysts expect from the company prior to the earnings release.

There has been no upward or downward revision for the company’s fourth-quarter bottom line over the past 30 days. The current consensus estimate of a loss stands at 6 cents per share, indicating a year-over-year decline of almost 129%.

Further, the Zacks Consensus Estimate for revenues of $1.2 billion suggests a 30% drop from the prior-year quarter.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Chesapeake Energy this time around. This is because it has the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Chesapeake Energy has an Earnings ESP of +2.13%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

What is Driving the Better-Than-Expected Earnings?

Chesapeake Energy estimates average daily oil equivalent production for the December quarter of 2019 at 476 to 478 (MBoE/D), indicating a rise from the year-ago quarter’s 464 MBoE/D. However, the Zacks Consensus Estimate for average sales price of natural gas (excluding gains/losses on derivatives) is pegged at $2.42 per Mcf, suggesting a drop from the prior-year quarter’s $3.59 per Mcf.

With natural gas contributing the maximum to the company’s production volume, the expected rise in quarterly volumes of the commodity is a major plus. Meanwhile, a drop in price realizations of the commodity has probably partially offset the positive.

Other Energy Stocks With Favorable Combination

Here are some other companies from the energy space that you may want to consider on the basis of our model, which shows that these too have the right combination of elements to deliver an earnings beat in the upcoming quarterly reports:

EQT Corp. EQT has an Earnings ESP of +104.56% and a Zacks Rank #3. The company is scheduled to release quarterly earnings on Feb 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

Continental Resources CLR has an Earnings ESP of +13.15% and a Zacks Rank #3. The company is set to release quarterly earnings on Feb 26.

Dril-Quip DRQ has an Earnings ESP of +13.92% and a Zacks Rank #3. The company is slated to report quarterly earnings on Feb 27.

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