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EOG Resources (EOG) Q2 Earnings: Disappointment in Store?

Upstream energy player EOG Resources Inc. EOG is expected to release second-quarter 2017 results on Aug 1, after the closing bell.

Last quarter, the company posted an earnings surprise of 0.00%. In the last four quarters, the company’s average earnings surprise was a positive 21.79%. Let’s see how things are shaping up for this announcement.

Factors Influencing This Past Quarter

As compared to the year-ago quarter, the pricing scenario for both crude and natural gas has improved considerably. This is a favorable development for EOG Resources as it has been able to sell the commodities at favorable prices.  

Also, for second-quarter 2017, EOG Resources expects production in the range of 562.2−592.7 MBOE/D, higher than 551.1 MBOE/D recorded in the April-to-June quarter of 2016. Hence, higher projected output in the view of increased oil and natural gas might drive earnings for EOG Resources.

However, we are concerned about the company’s long-term debt scenario. Since the beginning of 2015, EOG Resources’ long-term debt has been on the rise, reflecting the company’s weak balance sheet.

Stock Performance

During the quarter, EOG Resources lost 7.2% as compared to the 16.9% decline of the industry.   

Earnings Whispers

Our proven model does not conclusively show that EOG 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. That is not the case here, as you will see below.

Zacks ESP:  EOG Resources has an Earnings ESP of -16.67%. This is because the Most Accurate estimate stands at 10 cents while the Zacks Consensus Estimate is pegged at 12 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.   

Zacks Rank:  EOG Resources carries a Zacks Rank #4. Please note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the energy sector that, according to our model, have the right combination of elements to post an earnings beat this quarter: 

Boardwalk Pipeline Partners LP BWP has an Earnings ESP of +6.90% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Williams Companies Inc WMB has an Earnings ESP of +50.00% and a Zacks Rank #3.

C&J Energy Services Inc. CJ has an Earnings ESP of +100.00% and a Zacks Rank #3.

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