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Can Canadian Natural Resources (CNQ) Q1 Earnings Surprise?

Independent oil and gas explorer Canadian Natural Resources Ltd. CNQ is set to release its first-quarter 2016 results before the opening bell on Thursday, May 5.

In the preceding three-month period, the Calgary, Alberta-based upstream player delivered a positive earnings surprise of 80.00% on aggressive cost control measures. As far as the earnings surprise history is concerned, the company has a good record: its beaten estimates in 3 of the last four quarters with an average beat of 47.65%.

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

Factors to Consider This Quarter

Like any other energy player − primarily involved in exploration, development and production of crude oil − the fate of Canadian Natural Resources’ business is directly correlated with crude prices. Continued weakness in commodity prices has significantly affected the company’s revenues, earnings and cash flows.

However, efficiencies on the production front might be able to mitigate some of the damage. In particular, the company boasts of a strong and diverse production base with long-life and low decline rate assets.

Moreover, Canadian Natural Resources has been able to reduce unit costs that will provide some buffer amid the tumbling commodity prices.

Earnings Whispers

Our proven model does not conclusively show that Canadian Natural Resources will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at a loss of 27 cents.

Zacks Rank: Canadian natural Resources has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for Canadian Natural Resources, here are some utilities you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

Seadrill Partners LLC SDLP has an Earnings ESP of +3.03% and a Zacks Rank #1. The company is expected to release earnings results on May 26.

Rose Rock Midstream L.P. RRMS has an Earnings ESP of +4.17% and a Zacks Rank #2. The company is anticipated to release earnings on May 5.

McDermott International Inc. MDR has an Earnings ESP of +100.00% and a Zacks Rank #3. The company is likely to release earnings on May 5.

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