Is A Beat Ahead For Hess Corp (HES) This Earnings Season?

Hess Corporation (NYSE:HES) , a global exploration and production (E&P) company that develops, produces, purchases, transports and sells crude oil and natural gas, is expected to report second-quarter 2016 earnings on Jul 27.

In the last quarter, the company reported loss from continuing operations of $1.72 per share, narrower than the Zacks Consensus Estimate of a loss of $1.81. However, the reported figure widened substantially from the year-ago quarter loss of 98 cents per share. The underperformance was mainly due to the plunge in oil and gas prices. Let’s see how things are shaping up prior to the announcement.

HESS CORP Price and EPS Surprise

HESS CORP Price and EPS Surprise | HESS CORP Quote

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

Earnings Whispers

Our proven model shows that Hess is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +2.38%. This is because the Most Accurate estimate stands at a loss of $1.23, while the Zacks Consensus Estimate is pegged at a loss of $1.26. This is very meaningful and a leading indicator of a likely positive earnings surprise.

Zacks Rank: Hess carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Hold) or 3 have a significantly higher chance of beating earnings.

Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of Hess’ favorable Zacks Rank and a positive Earnings ESP makes us confident about an earnings beat.

What's Driving the Better-Than-Expected Earnings?

Hess has transformed to a predominantly E&P entity, thereby shifting its growth approach from high-impact exploration to low-risk unconventionals, and a smaller, more focused exploration portfolio. The company divested its downstream businesses, including energy marketing, terminals, retail marketing and refining operations. In view of the global economic slowdown and new refining capacity entering the world market, the aforesaid decisions will help enhance Hess’ shareholder value and boost its earnings.

Hess’ priority remains investment in future growth with a balanced approach between unconventional, exploitation and exploration. Recently, the company divested several assets and is in the process of shedding its other assets. The amount raised through asset sale is expected to help fund E&P investments. However, the company will continue to look at all opportunities to enhance long-term shareholder value.

Stocks to Consider

Here are some companies from the same space which, according to our model, have the right combination of elements to post an earnings beat this quarter:

Spectra Energy Corp. (NYSE:SE) has an Earnings ESP of +16.00% and a Zacks Rank #1. The company is slated to release earnings on Aug 3.

EOG Resources, Inc. (NYSE:EOG) has an Earnings ESP of +2.00% and a Zacks Rank #2. The company is slated to release earnings on Aug 4.

Pioneer Natural Resources Co. (NYSE:PXD) has an Earnings ESP of +19.44% and a Zacks Rank #2. The company is slated to release earnings on Jul 27.