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Can BP Plc (BP) Surprise Estimates This Earnings Season?

Published 07/21/2016, 11:14 PM
Updated 07/09/2023, 06:31 AM

Oil giant BP plc (LON:BP) (NYSE:BP) is expected to report second-quarter 2016 earnings on Jul 26, before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 165.38%. Over the last four quarters, the company’s average earnings surprise was a positive 42.06%. Let’s see how things are shaping up for this announcement.

Factors to Consider This Past Quarter

BP expects second-quarter 2016 production to be lower than the first quarter, reflecting PSA entitlement impact, seasonal turnaround and maintenance activity. In the downstream space, the company expects a significantly higher level of turnaround activity, particularly in the U.S., and some seasonal improvement in industry refining margins.

BP PLC Price and EPS Surprise

BP PLC Price and EPS Surprise | BP PLC Quote

The company’s overall picture for the second quarter remains closely tied to the volatility in crude prices. Crude, in sharp contrast to the previous few quarters, advanced more than 26% sequentially during the April–June period. West Texas Intermediate (WTI) crude futures during the second quarter hovered mostly between $40 and $50 per barrel. However, although data point to a recovery, the numbers may not yet be rosy for the company. This is because oil price is still hovering well below $50, which is nowhere near the breakeven price for many energy companies.

What Our Model Indicates

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

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate is in line with the Zacks Consensus Estimate of 24 cents.

Zacks Rank: BP has a Zacks Rank #2 which increases the predictive power of ESP. But we need a positive ESP to be confident of a beat.

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

Stocks That Warrant a Look

Here are some companies in the energy sector with the right combination of elements to post an earnings beat this quarter:

Legacy Reserves LP (NASDAQ:LGCY) has an Earnings ESP of +31.58% and a Zacks Rank #1. The partnership is expected to release earnings results on Aug 3.

Ring Energy, Inc. (NYSE:REI) has an Earnings ESP of +33.33% and a Zacks Rank #2. The company is anticipated to release earnings results on Aug 8.

Anadarko Petroleum Corporation (NYSE:APC) has an Earnings ESP of +1.33% and a Zacks Rank #2. The company is likely to release earnings results on Jul 26.



BP PLC (BP): Free Stock Analysis Report

ANADARKO PETROL (APC): Free Stock Analysis Report

LEGACY RESERVES (LGCY): Free Stock Analysis Report

RING ENERGY INC (REI): Free Stock Analysis Report

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