Noble (NE) Warming Up To Q4 Earnings: What's In The Cards?

NobleCorporation plc (NYSE:NE) is expected to report fourth-quarter 2017 earnings results on Feb 21, after market close.

Last quarter, the offshore drilling contractor delivered an earnings surprise of 0.00%. For the last four quarters, Noble has delivered an average positive surprise of 12.8%.

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

Earnings Whispers

Our proven model does not conclusively show that Noble is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Noble has an Earnings ESP of +4.92%. This is because the Most Accurate estimate stands at a loss of 31 cents, while the Zacks Consensus Estimate is pegged at a loss of 32 cents. The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Noble carries a Zacks Rank #4 (Sell), which lowers the predictive power of ESP. Notably, stocks with a Zacks Rank #4 or 5 (Strong Sell) should never be considered going into an earnings announcement. Hence this combination leaves suprise prediction inconclusive.

Factors Likely to Influence This Quarter

Noble has a robust portfolio of highly advanced rigs and jackups, capable of operating in offshore fields. The company’s backlog totaled $3.2 billion as of Sep 30, 2017.

The improvement in the oil pricing scenario is likely to be favorable for Noble. The West Texas Intermediate (WTI) crude increased almost 20% in the October-to-December quarter of 2017, per The U.S. Energy Information Administration (EIA). Through most of November and the entire December, the commodity traded above the $55-per-barrel psychological mark. The extension of the production cut deal by OPEC players supported the rally in crude.

On Nov 30, 2017, OPEC members met non-OPEC players to decide on an extension of the crude production cut accord, first signed in late 2016, beyond the first quarter of 2018. More than 20 oil producers, including leading exporters like Russia and Saudi Arabia, participated in the meeting. As expected by most analysts, all crude exporters decided to extend the deal through 2018-end. Saudi Arabia, Russia and their allies have pledged to put 1.8 million barrels a day of crude oil out of the market through the end of this year.

Moreover, Noble has been able to significantly reduce expenses related to contract drilling activities during the first three quarters of 2017. Over the first nine months of 2017, the firm reported $487.8 million of contract drilling services, down 30.6% from $702.6 million in the year-ago period.

However, we are concerned with the company’s weak balance sheet. Noble’s debt-to-capitalization ratio of 41.4% is higher than 37.8% of the industry.

Stocks to Consider

Here are a few companies which per our model, have the right combination of elements to beat on earnings this quarter:

Houston, TX-based EOG Resources (NYSE:EOG) is an upstream company. It has an Earnings ESP of +4.06% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

WildHorse Resource Development Corporation (NYSE:WRD) , based in Houston, TX, is also an upstream energy firm. It has an Earnings ESP of + 5.26% and a Zacks Rank #1.

Dallas, TX-based RSP Permian, Inc. (NYSE:RSPP) is an upstream energy company with an Earnings ESP of +1.64%. It is a Zacks #1 Ranked player.

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