Emerge Energy (EMES): What Awaits This Earnings Season?

Fracking sand player and fuel processor Emerge Energy Services LP (NYSE:EMES) is expected to release first-quarter 2016 results on May 2.

Last quarter, the partnership had delivered a negative earnings surprise of 54.17%. Moreover, during the last four quarters, Emerge Energy Services’ average earnings surprise came at negative 81.45%. Let’s see how things are shaping up for this announcement.

Factors Likely to Influence This Quarter

Following the weak crude and natural gas pricing scenario during the entire first quarter, Emerge Energy’s earnings from its “Sand Segment” might be hampered. This is because this unit represents the partnership’s business of extracting oil and gas from various grades of industrial sand.

To support this fact, we should note for most of the times in the first quarter, crude traded below $40 per barrel. Most importantly, the West Texas Intermediate (WTI) crude fell to the 12-year low mark in mid-February. On top of that, natural gas has not fared well as reflected by gas pricing fundamentals that were weaker than the prior-year quarter. Overall, the business scenario was not favorable for upstream operations or oilfield services players.

Earnings Whispers?

Our proven model does not conclusively show that Emerge Energy Services is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as is elaborated below.

Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This leads to an ESP of -6.78% for Emerge Energy Services as the Most Accurate estimate stands at a loss of 63 cents while the Zacks Consensus Estimate is pegged narrower at a loss of 59 cents.

Zacks Rank: Emerge Energy Services has a Zacks Rank #5 (Strong Sell).

We caution 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

Here are some companies to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Enable Midstream Partners, LP (NYSE:ENBL) with an Earnings ESP of +21.05% and a Zacks Rank #2 (Buy).

Bill Barrett Corp. (NYSE:BBG) with an Earnings ESP of + 9.09% and a Zacks Rank #2.

Spectra Energy (NYSE:SE) Partners LP (NYSE:SEP) has an Earnings ESP of + 2.27% and a Zacks Rank #2.