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Is Canadian Natural (CNQ) Likely to Beat on Q3 Earnings?

Independent oil and gas explorer Canadian Natural Resources Limited CNQ is set to release its third-quarter 2017 results before the opening bell on Nov 2.

Last quarter, this Calgary, Alberta-based upstream player delivered a positive surprise of 22.2%. In the past month, current quarter estimates have risen from 11 cents per share to 16 cents per share, while current year estimates have risen from 73 cents per share to 92 cents per share.

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

What the Zacks Model Unveils

Our proven model shows that Canadian Natural Resources is likely to beat estimates this quarter 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 +1.08%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Canadian Natural Resources currently carries a Zacks Rank #2 (Buy) which, when combined with a positive ESP, makes us confident of earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

Factors at Play

Canadian Natural Resources is engaged in the acquisition, development and exploitation of crude oil and natural gas properties. The company has a strong and diverse production base with long-life and low decline rate assets.

Canadian Natural Resources’ business is directly linked to oil and gas prices. The pricing scenario for oil and gas has improved from the year-ago quarter and from the multi-year lows reached in 2016. This is a favorable development for Canadian Natural Resources as it helps the company to sell the increased output at higher prices. This, in turn, is expected to boost the company’s third-quarter results.

In the last quarter the company witnessed a 16% year-over-year increase and a 4% sequential rise in production. With the company’s solid assets and execution strength, we expect this trend to continue in the third quarter.

Moreover, driven by operational efficiencies, Canadian Natural Resources was able to reduce year-over-year operating costs by 18.5% in the last quarter. We expect the trend to continue in the third quarter as well. Better pricing scenario and decline in costs are likely to result in significant cash savings in the third quarter.

Also, the company has seen two positive estimate revisions in the last 30 days. We expect Canadian Natural Resources to witness sales growth of 83.6% year over year in the third quarter. The company’s earnings in the third quarter are expected to increase 164.6% year over year.

Q3 Price Performance

Canadian Natural has gained 16.1% in the third quarter compared with 18.1% growth of its industry.

Other Stocks to Consider

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

Cenovus Energy Inc CVE is an integrated oil major from Canada. The company has an Earnings ESP of +40.00% and a Zacks Rank #2.

Energy Transfer Partners, L.P. ETP is a midstream company. It has an Earnings ESP of +27.27% and a Zacks Rank #3.

Denbury Resources Inc. DNR is an exploration and production company based in Plano, TX. It has an Earnings ESP of +11.11% and a Zacks Rank #2.

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Denbury Resources Inc. (DNR): Free Stock Analysis Report
 
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