Vanguard (VNR) To Report Q2 Earnings: What's In The Cards?

Upstream energy partnership Vanguard Natural Resources LLC (NASDAQ:VNR) is set to release second-quarter 2016 results after the closing bell on Wednesday, Jul 27.

In the preceding three-month period, this Houston, TX-based oil and gas finder reported a massive positive earnings surprise of 133.33%. Coming to the earnings surprise history, Vanguard Natural Resources has a mixed track record. The partnership beat estimates in two out of the last four quarters.

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

Factors to Consider This Quarter

Vanguard Natural Resources is a firm in the oil and gas exploration and production industry, which makes its earnings vulnerable to commodity price fluctuations. Although oil prices rose from the mid-February lows, the pricing scenario was weaker than the comparable quarter last year. The picture was the same for natural gas as well.

However, the firm has hedged the majority of its production from this April to December at promising prices. It has hedged 89% of oil at $66.43 per barrel and 84% of gas at $4.17 per MMBtu. This should cushion Vanguard Natural Resources from the current volatile pricing environment.

During the quarter, the partnership completed the divestment of oil and gas resources in SCOOP/STACK region in Oklahoma. We appreciate the sale, as the proceeds will likely be utilized for repaying debt under the reserve based credit facility of Vanguard Natural.

Earnings Whispers

Our proven model does not conclusively show that Vanguard Natural Resources will 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: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -7.69%. This is because the Most Accurate estimate stands at 12 cents, while the Zacks Consensus Estimate is pegged higher, at 13 cents.

Zacks Rank: Vanguard Natural Resources carries a Zacks Rank #2. Though this increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

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

VANGUARD NATURL Price and EPS Surprise

Stocks to Consider

While an earnings beat looks uncertain for Vanguard Natural Resources, here are some companies you may want to consider on the basis of our model:

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.

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.