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Cimarex (XEC) Likely to Beat Earnings in Q3: Here's Why

Cimarex Energy Co. XEC is set to report third-quarter 2017 results on Nov 7, after the closing bell.

Last quarter, this upstream energy player posted a positive earnings surprise of 11.6%. Moreover, Cimarexdelivered an average positive earnings surprise of 11.9% for the last four quarters.

Which Way Are the Estimates Headed?

Let’s take a look at the estimate revision trend in order to get a clear picture of analyst opinion on the stock before the earnings release.

The Zacks Consensus Estimate of 98 cents for third-quarter earnings has been revised upward over the last 30 days, with 14 firms being bullish and seven firms taking a bearish stance. The consensus estimate reflects a year-over-year rise of almost 138%.

Why a Likely Positive Surprise?

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

Zacks ESP: Cimarex’s Earnings ESP is +0.01%. A favorable ESP serves as a meaningful and leading indicator of a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.       

Zacks Rank: Cimarex currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.  

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

The combination of Cimarex’s Zacks Rank #3 and +0.01% ESP makes us reasonably optimistic of an earnings beat.  

What’s Driving the Better-than-Expected Earnings?

The Zacks Consensus Estimate for total production stands at 1,138 million cubic feet equivalent (Mmcfe/d), higher than 947 Mmcfe/d in the comparable quarter last year.  

The Zacks Consensus Estimate for natural gas realized price is pegged at $2.74 per Mcf compared with $2.66 in third-quarter 2016. Moreover, the estimate for realized oil price stands at $44.26 a barrel, up from $40.54 in the year-earlier quarter. 

Hence, higher expected natural gas equivalent production amid a favorable gas and oil pricing scenario should support the company’s business.

Cimarex has no current debt while long-term debt has been contracting steadily since 2017, reflecting balance sheet strength.



Q3 Price Outperformance

During the quarter, Cimarex has rallied 20.9%, outperforming the industry’s 5% gain.    



Other Stocks to Consider

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

Denbury Resources Inc. DNR, headquartered in Plano, TX, is an upstream energy firm with a strong foothold in the Rocky Mountain region and the Gulf Coast area. The company 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.

Energen Corporation EGN, headquartered in Birmingham, AL, is primarily involved in exploration and production activities in the oil-rich Permian Basin. The company has an Earnings ESP of +3.75% and a Zacks Rank #3.

Extraction Oil & Gas, Inc. XOG, headquartered in Denver, CO, is an upstream energy player. The company has an Earnings ESP of +4.55% and a Zacks Rank #3.

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