Devon Energy (DVN) Likely To Beat Estimates In Q2 Earnings

We expect Devon Energy Corp. (NYSE:DVN) to beat expectations when it reports second-quarter 2016 results after the market closes on Aug 2. Last quarter, this independent energy company reported a positive earnings surprise of 11.67%. Let’s see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Devon Energy is likely to beat estimates because it has the right combination of two key ingredients. 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 and Devon Energy has the right mix.

Zacks ESP: The Earnings ESP which represents the difference between the Most Accurate estimate of a loss of 21 cents and the Zacks Consensus Estimate of a loss of 23 cents is +8.70%. This is a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Devon Energy currently carries a Zacks Rank #2. The combination of Devon Energy’s favorable Zacks Rank and positive ESP makes us reasonably confident of a positive surprise this season.

Conversely, we caution against Sell-rated stocks (#4 or #5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors to Consider

The second quarter witnessed a much awaited recovery in crude prices after sustained weakness for nearly two years. The upward movement in the crude oil price is likely to boost Devon Energy’s results in the second quarter as the company is expected to produce more crude volumes from its core assets.

During the quarter the company entered into definitive agreements with different parties to sell off its non-core assets. Total projected asset sale proceeds of $3.2 billion have exceeded the sales proceed guidance of $2 billion to $3 billion for 2016.

Devon Energy will also benefit from its ongoing cost saving initiatives, which will further boost its margins in the second quarter.

Other Stocks to Consider

Devon Energy is not the only energy company looking up this earnings season. We see likely earnings beats coming from these companies as well:

EOG Resources Inc. (NYSE:EOG) has an Earnings ESP of +2.00% and a Zacks Rank #2. The company is expected to release second-quarter 2016 results on Aug 4, before the market opens.

Noble Energy Inc. (NYSE:NBL) has an Earnings ESP of +6.25% and a Zacks Rank #2. The company is expected to release second-quarter 2016 results on Aug 3, before the market opens.

Antero Resources Corp. (NYSE:AR) has an Earnings ESP of +400.00% and a Zacks Rank #2. The company is expected to release second-quarter 2016 results after the market closes on Aug 2.

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