Will Weak Cash Flow Hurt Weatherford's (WFT) Q4 Earnings?

Weatherford International Ltd. (NYSE:WFT) is expected to report fourth-quarter 2017 earnings on Feb 2, after the closing bell.

In the previous quarter, the leading oilfield services company delivered positive earnings surprise of 8.33%. Weatherford posted average positive earnings surprise of 2.03% in the trailing four quarters.

Let’s see how things are shaping up prior to the announcement.

Factors Likely to Influence This Quarter

The Zacks Consensus Estimate for operating income from the Middle East/North Africa/Asia Pacific is $14.3 million, up from $8 million in the last quarter and $9 million in the year-ago quarter. Last quarter, Weatherford received operating income from this region against a loss in the year-ago quarter. Growing market share in this region will drive the company’s revenues in the fourth quarter. However, project start-up costs are likely to be a dampener.

The Zacks Consensus Estimate for operating income from the Latin America is $1.1 million, down from $6 million in the year-ago quarter.

For the Europe/West Africa/CIS region, the Zacks Consensus Estimate for operating income is $14.14 million, up from $14 million in the previous quarter and a loss of $8 million in the year-ago quarter.

Moreover, the Zacks Consensus Estimate for operating revenues from North America region is $558 million, higher than last quarter’s $538 million and the year-ago quarter’s $485 million. Last quarter, Weatherford received maximum operating revenues from this region. The company expects revenues from this region to rise in the fourth quarter, despite no increase in rig count in the United States. Additionally, start of fresh U.S. oilfield services contracts, following the rise in oil prices, will favor the growth.

Earnings Whisper?

Our proven model does not conclusively show that Weatherford is likely to beat on earnings 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. That is not the case here, as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.14%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Weatherford has a Zacks Rank #4 (Sell).

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

Q4 Price Performance

During the quarter, Weatherford’s shares lost 8.9% compared with 1.8% decline of its industry.

Stocks to Consider

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

Headquartered in Irving, TX, Pioneer Natural Resources Company (NYSE:PXD) is an independent oil and gas exploration and production company. The company has an Earnings ESP of +4.11% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Houston, TX, Cabot Oil & Gas Corp. (NYSE:COG) is an independent oil and gas exploration company with producing properties mainly in the continental United States. The company has an Earnings ESP of +9.87% and sports a Zacks Rank #1.

Cimarex Energy Co. (NYSE:XEC) is an independent oil & gas exploration and production firm. The company has an Earnings ESP of +0.67% and sports a Zacks Rank #3.

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