Canadian Natural Resources (CNQ) Q4 Earnings: What's Ahead?

Canadian Natural Resources Limited (TO:CNQ) is set to release fourth-quarter 2017 results before the opening bell on Mar 1.

Last quarter, this Calgary, Alberta-based oil and gas explorer delivered a negative surprise of 6.25% on higher costs. However, coming to its earnings surprise history, the company displays a decent record, delivering an average positive earnings surprise of 0.78% in the trailing four quarters.

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

Which Way Are Estimates Headed?

Let’s look at the estimate revision trend to get a clear picture of what analysts expect from the earnings release.

The Zacks Consensus Estimate of 32 cents for the fourth quarter has been stable in the last 30 days, reflecting sequential growth but a year-over-year decline.

Further, analysts polled by Zacks expect revenues of $3,563 million for the quarter, up 29.5% from the prior-year quarter and 4.2% from the prior quarter.

Factors at Play

Canadian Natural Resources is engaged in the acquisition, development and exploitation of crude oil and natural gas properties. The company has a strong and diverse production base with long-life and low decline rate assets. In the last quarter, the company witnessed a 41% year-over-year increase and 13.5% sequential rise in production. With the company’s solid assets and strong project execution, we expect this trend to continue in the fourth quarter as well.

Moreover, the upstream player is poised to benefit from higher crude price realizations. Prices of oil at the end of the fourth quarter were $60.46 per barrel, up about 12.5% and 19.6% year over year and sequentially, respectively. Improving energy landscape is attributed to tightening supplies, brighter demand outlook and OPEC-deal extension talks. This is a favorable development for Canadian Natural Resources as it helps the company to sell the increased output at higher prices, thereby boosting revenues.

However, while crude oil prices witnessed a rally, the quarter ended with natural-gas prices at $2.95 MMBtu compared with $3.72 MMBtu in the year-ago quarter, reflecting a decline of around 20.7%. The weakness in natural-gas prices might adversely impact the results. Also, the company incurred expenses of C$3,506 million in the prior quarter, reflecting a year-over-year increase of 19.9%. If the trend continues, it may put a dent in the company earnings.

Earnings Whispers

Our proven model too does not conclusively show that Canadian Natural Resources is likely to beat earnings estimates this quarter. This 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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 -14.29%. This is because the Most Accurate estimate stands at 27 cents, lower than the Zacks Consensus Estimate of 32 cents.

Zacks Rank: Canadian Natural Resources, whose peers include Encana Corporation (NYSE:ECA) , Bellatrix Exploration Limited (TO:BXE) and Crescent Point Energy Corporation (TO:CPG) among others, carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP makes a surprise prediction difficult.

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

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