BP Warming Up To Q4 Earnings: What's In Store For The Stock?

BP plc (LON:BP) (NYSE:BP) is expected to report fourth-quarter 2017 earnings on Feb 6, before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 14%. Also, the company was able to beat the Zacks Consensus Estimate for earnings in three of the prior four quarters, the average positive surprise being 26.8%.

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

Which Way Are Estimates Treading?

Let’s look at the estimate revisions in order to get a clear picture of what analysts expect from the company’s upcoming earnings release.

The Zacks Consensus Estimate for fourth-quarter earnings of 66 cents has been stable in the last seven days. It reflects year-over-year growth of 407.7%.

Factors to Consider

Following the ongoing ramp up of key upstream developments, BP expects production to increase sequentially in the October-to-December quarter.

Also, the West Texas Intermediate (WTI) crude increased almost 20% in the October-to-December quarter of 2017, per The U.S. Energy Information Administration (EIA). Through most of November and the entire December, the commodity traded above the $55-per-barrel psychological mark. The extension of the production cut deal by OPEC players supported the rally in crude.

On Nov 30, 2017, OPEC members met non-OPEC players to decide on an extension of the crude production cut accord, first signed in late 2016, beyond the first quarter of 2018. More than 20 oil producers, including leading exporters like Russia and Saudi Arabia, participated in the meeting. As expected by most analysts, all crude exporters decided to extend the deal through 2018-end. Saudi Arabia, Russia and their allies have pledged to put 1.8 million barrels a day of crude oil out of the market through the end of this year.

The improvement in oil price along with higher expected quarterly production by the company will likely fetch BP impressive profits from upstream business.

However, for fourth-quarter 2017, the company expects refining margin to decline sequentially owing to turnaround activities.

Earnings Whispers

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) 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 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 66 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: BP carries a Zacks Rank #1. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s 0.00% ESPmakes surprise prediction difficult.

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

Stocks to Consider

Though an earnings beat looks uncertain for BP, here are a few firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:

Headquartered in Irving, TX, Pioneer Natural Resources Company (NYSE:PXD) is an upstream energy player, primarily exploring oil and gas. The company has an Earnings ESP of +5.53% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Denver, CO, Cimarex Energy (NYSE:XEC) is also an upstream energy player. The company has an Earnings ESP of +1.01% and a Zacks Rank #3.

Headquartered in Houston, TX, Occidental Petroleum (NYSE:OXY) is a leading integrated energy firm. The company has an Earnings ESP of +1.73% and a Zacks Rank #1.

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