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Can SunCoke Energy (SXC) Earnings Beat Estimates in Q1?

SunCoke Energy SXC will release first quarter 2016 financial results before the market opens on Apr 27, 2016. In the prior quarter, this coke producer reported a positive earnings surprise of 220%. We expect SunCoke to surpass earnings estimates this time around as well.

Why a Likely Positive Surprise?

Our proven model shows that SunCoke Energy is likely to beat earnings because it has the right combination of two key ingredients. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Positive Zacks ESP: This is because the Most Accurate estimate stands at 10 cents while the Zacks Consensus Estimate is pegged at 4 cents, resulting in +150% ESP.

Zacks Rank: SunCoke Energy’s Zacks Rank #1 increases the predictive power of the ESP, and when combined with +150% ESP, a beat appears to be quite likely this quarter.

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

Surprise History

The above chart indicates that SunCoke Energy was able to register a positive earnings surprise last quarter after failing to do so in the previous three quarters.

What is Driving the Better Than Expected Earnings?

The coal industry continues to fight an uphill battle against stringent emission regulations and  increasing uptake of clean burning natural gas. The declining demand for coal and a drop in selling prices are making it difficult for the coal players.

Despite the troubled times, SunCoke is expected to benefit from sustained performances in its Domestic Coke and Coal Logistics businesses. In addition, SunCoke will reap the benefits of the Convent acquisition and improvement at its Indiana Harbor facility in the to-be-reported quarter.

Evaluating the current situation, SunCoke has decided to lower its capital outlay in 2016, which will help in improving its financial flexibility.

Stocks to Consider

SunCoke Energy apart we do not have any other coal miner worth considering on the basis of our model. Rather we suggest some operators in the oil & energy sector worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

Baytex Energy Corp. BTE has an earnings ESP of +29.41% and carries a Zacks Rank #3. It is expected to report earnings before the market opens on May 3, 2016.

EQT Corporation EQT has an earnings ESP of +333.33% and carries a Zacks Rank #3. It is expected to report earnings before the market opens on Apr 28, 2016.

WPX Energy, Inc. WPX has an earnings ESP of +32.14% and carries a Zacks Rank #3. It is expected to report earnings before the market opens on May 5, 2016.

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EQT CORP (EQT): Free Stock Analysis Report
 
BAYTEX ENERGY (BTE): Free Stock Analysis Report
 
SUNCOKE ENERGY (SXC): Free Stock Analysis Report
 
WPX ENERGY INC (WPX): Free Stock Analysis Report
 
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