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Will Q1 Earnings Hold a Surprise for Hess Corp (HES) Stock?

Hess Corporation HES, a global exploration and production (E&P) company that develops, produces, purchases, transports and sells crude oil and natural gas, is expected to report first-quarter 2016 earnings on Apr 27.

In the last quarter, the company reported a loss from continuing operations of $1.40 per share, wider than the Zacks Consensus Estimate of a loss of $1.10. In the year-ago quarter, the company had posted earnings of $0.18. Let’s see how things are shaping up prior to the announcement.

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

Factors at Play

Hess has transformed to a predominantly E&P entity, thereby shifting its growth approach from high-impact exploration to low-risk unconventionals, and a smaller, more focused exploration portfolio. The company divested its downstream businesses including energy marketing, terminals, retail marketing and refining operations. In view of the global economic slowdown and new refining capacity entering the world market, the aforesaid decisions will help enhance Hess’ shareholder value.

Hess’ priority remains investment in future growth with a balanced approach between unconventional, exploitation and exploration. Recently, the company divested several assets and is in the process of shedding its other assets. The amount raised through asset sale is expected to help fund E&P investments. However, the company will continue to look at all opportunities to enhance long-term shareholder value.

Hess remains on track with its multi-year transformation program. However, to support its capital expenditures through 2016, the company continues to be highly dependent on major asset sales. Hence, the company’s growth and returns picture will likely be hindered by the asset sale programs in the near term. Moreover, in 2015, Hess registered a fall in its reserves. As of year-end 2015, Hess’ proved reserves tally was 1.09 billion oil-equivalent barrels, down 24.1% from the 2014-end level. The current scenario continues to be gloomy and depicts lower reserve and production in 2016.

Earnings Whispers

Our proven model shows that Hess is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.00%.

Zacks Rank: Hess carries a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP, makes earnings prediction difficult.

Note that stocks with Zacks Ranks #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (Zacks Ranks #4 and 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here are some companies from the same space which, according to our model, have the right combination of elements to post an earnings beat this quarter:

Chesapeake Energy CHK has an Earnings ESP of +9.09% and a Zacks Rank #2.

Diamond Offshore Drilling, Inc. DO has an Earnings ESP of +11.11% and a Zacks Rank #3.

Ensco plc ESV has an Earnings ESP of +6.25 % and a Zacks Rank #3.

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ENSCO PLC (ESV): Free Stock Analysis Report
 
DIAMOND OFFSHOR (DO): Free Stock Analysis Report
 
CHESAPEAKE ENGY (CHK): Free Stock Analysis Report
 
HESS CORP (HES): Free Stock Analysis Report
 
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