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Will Newfield Exploration (NFX) Disappoint in Q3 Earnings?

Upstream energy player Newfield Exploration Company NFX is expected to report third-quarter 2017 earnings on Oct 31, after the closing bell.

The company missed the Zacks Consensus Estimate last quarter, resulting in a negative earnings surprise of 2.3%. However, over the trailing four quarters, it has delivered an average positive earnings surprise of 12.3%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

The Zacks Consensus Estimate for average sale price of natural gas is $2.80 per thousand cubic feet (Mcf), higher than last quarter’s $2.75 per Mcf and the year-ago quarter’s $2.38 per Mcf. The Zacks Consensus Estimate for natural gas production for the third quarter is 33.46 billion cubic feet (Bcf), up from 31.2 Bcf last quarter but down from 35.60 Bcf in the year-ago quarter.

The average sales price of natural gas liquids for the third quarter is estimated to be $23.52 per barrel, lower than the reported price of last quarter’s $24.54 per barrel but higher than $18.53 per barrel in the year-ago quarter. Production is expected to rise to 2.82 million barrels (MMBbls) from second-quarter production of 2.49 MMBbls but fall from the year-ago quarter’s production of 2.90 MMBbls.

Average crude oil and condensate sales price is expected to be $44.16 per barrel, lower than second quarter’s $46.81 per barrel and the year-ago quarter’s price of $46.34 per barrel. Production of crude oil per day for the third quarter is expected to fall to 5.84 MMBbls from previous quarter’s 5.96 MMBbls and the year-ago quarter’s 6.40 MMBbls.

We expect production of all commodities to decline in the third quarter compared to the year-ago quarter. Some of the average realized prices are expected to increase. Hence, it is difficult to conclusively predict their net impact on third-quarter results.

Earnings Whispers?

Our proven model does not conclusively show that Newfield is likely to beat the Zacks Consensus Estimate 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. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: Its Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, -0.84%.  This is because the Most Accurate estimate stands at 42 cents while the Zacks Consensus Estimate is pegged higher at 43 cents.

Zacks Rank: Newfield’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Q3 Stock Price Performance

Newfield has gained 4.2% in the third quarter compared with 5.1% growth of its industry.

Stocks to Consider                                                                                       

Here are some companies that you may consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

Denbury Resources Inc. DNR is an exploration and production company based in Plano, TX. It has an Earnings ESP of +100.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian Natural Resources Limited CNQ is an exploration and production company. It has an Earnings ESP of +1.08% and a Zacks Rank #1.

Cenovus Energy Inc CVE is an integrated oil major from Canada. The company has an Earnings ESP of +40.0% and a Zacks Rank #2.

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Canadian Natural Resources Limited (CNQ): Free Stock Analysis Report
 
Cenovus Energy Inc (CVE): Free Stock Analysis Report
 
Denbury Resources Inc. (DNR): Free Stock Analysis Report
 
Newfield Exploration Company (NFX): Free Stock Analysis Report
 
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