Will ConocoPhillips (COP) Disappoint This Earnings Season?

ConocoPhillips (NYSE:COP) , an upstream energy firm, will release second-quarter 2017 results on Jul 27, before the opening bell.

Last quarter, ConocoPhillips posted a negative earnings surprise of 300.00%. The average earnings surprise for the trailing four quarters is also a negative 72.87%. Let’s see how things are shaping up for this announcement.

Past Quarter Flashback

Although long-term debt has been noticeably declined in first-quarter 2017, the same has escalated manifold since the beginning of 2014. Also, after rising throughout 2016, cash & equivalents are clearly headed south.

Also, the commodity pricing scenario did not show improvement in the second quarter. Oil and gas prices have been low for almost three years now and the prices slipped further during second-quarter 2017. The prolonged weakness can be attributed to a persistent supply glut in the commodity market.

During the April-to-June quarter of this year, oil and natural gas prices fell 8.4% and 5%, respectively. Hence, the OPEC’s historical production cut extension deal until Mar 2018 has failed to drive oil. Natural gas is also an oversupplied commodity as is reflected by its inventory level of 2.816 tcf – as of Jun 23 – almost 7% higher than the five-year average mark (as per The U.S. Energy Information Administration).

On top of that, ConocoPhillips’ expectation of Q2 production range of 1,495–1,535 thousand barrels of oil equivalent per day (MBOED) is lower than 1,546 MBOED produced during second-quarter 2016.

We can say that weaker oil and gas prices and lower projected production level could hurt the explorer’s numbers in the second quarter.

Q2 Price Performance

During the April-to-June quarter of this year ConocoPhillips lost 11.9% as compared to the 16.9% fall of its industry.

Earnings Whispers

Our proven model does not conclusively show that ConocoPhillips 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, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP is -300.00%. This is because the Most Accurate estimate is pegged at a loss of 2 cents, while the Zacks Consensus Estimate is pegged at a profit of 1 cent. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: ConocoPhillips has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks from the energy space which, according to our model, have the right combination of elements to post an earnings beat this quarter are:

Boardwalk Pipeline Partners LP (NYSE:BWP) has an Earnings ESP of +6.90% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TransCanada Corporation (TO:TRP) , has an Earnings ESP of +7.84% and a Zacks Rank #1.

C&J Energy Services Inc. (NYSE:CJ) has an Earnings ESP of +100.00% and a Zacks Rank #3 (Hold).

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