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Emerge Energy (EMES) Q1 Earnings: A Surprise in Store?

Fracking sand player and fuel processor Emerge Energy Services LP EMES is expected to release first-quarter 2016 results before the opening bell on Tuesday, May 10.

Last quarter, the partnership had delivered a negative earnings surprise of 54.17%. Moreover, in the last four quarters, Emerge Energy Services delivered an average negative earnings surprise of 81.45%. Let’s see how things are shaping up for this announcement.  

Factors Likely to Influence This Quarter

Given the weak crude and natural gas pricing scenario during the entire first quarter, Emerge Energy Services’ earnings from its “Sand Segment” are likely to be lackluster. This is because this unit is responsible for the partnership’s business of oil and gas extraction from various grades of industrial sand.

Notably, crude traded mostly below $40 per barrel in the first quarter. Most importantly, West Texas Intermediate (WTI) crude fell to the 12-year low mark in mid-February. Also, natural gas has underperformed as reflected by weaker gas pricing fundamentals than the prior-year quarter. Overall, the business scenario was unfavorable for upstream operations or oilfield services players.  

However, Emerge Energy Services anticipates first-quarter margin to improve from the fourth quarter of 2015. This is because the partnership projects the petroleum products market to have been steadier.

Earnings Whispers

Our proven model does not conclusively show that Emerge Energy Services is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as is elaborated below.

Zacks ESP: Earnings ESP for Emerge Energy Services is -6.78% for as the Most Accurate estimate stands at a loss of 63 cents, while the Zacks Consensus Estimate is pegged at a loss of 59 cents. 

Zacks Rank:Emerge Energy Services has a Zacks Rank #3, which increases the predictive power of ESP. However, a negative ESP makes surprise prediction difficult.

Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.  

Stocks to Consider

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

NGL Energy Partners LP NGL with an Earnings ESP of +1.96% and a Zacks Rank #2 (Buy).The company is slated to release earnings on June 6.

American Midstream Partners, LP AMID with an Earnings ESP of + 22.73% and a Zacks Rank #3(Hold).  The company is slated to release earnings on May 9.

Canadian Solar Inc. CSIQ has an Earnings ESP of + 146.15% and a Zacks Rank #3.The company is slated to release earnings on May 11.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
CANADIAN SOLAR (CSIQ): Free Stock Analysis Report
 
NGL ENERGY PART (NGL): Free Stock Analysis Report
 
AMER MIDSTREAM (AMID): Free Stock Analysis Report
 
EMERGE ENRG SVC (EMES): Free Stock Analysis Report
 
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