Encana (ECA) To Post Q1 Earnings: What To Expect?

Canadian natural gas producer Encana Corp. (NYSE:ECA) is set to release its first-quarter 2017 results before the opening bell on Tuesday, May 2.

In the preceding three-month period, the Calgary, Alberta-based company reported better-than-expected operating earnings on the back of successful cost containment efforts.

Coming to earnings surprise history, Encana has a good record. It beat estimates in three of the last four quarters.

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

Factors to Consider This Quarter

At the end of the first quarter, natural gas was trading at around $3.20 per million British thermal units – in a sweet spot compared to the corresponding period of 2016 when the commodity dropped to its worst level in almost 17 years.

Encana’s successful cost reduction initiatives are expected to further cushion the results. To its credit, the company has been able to achieve a substantive decline in the operating cost structure.

However, a weak production profile continues to haunt the energy explorer. Last quarter, Encana’s natural gas production declined approximately 19% year over year to 1,276 million cubic feet per day, while liquids production fell 25% year over year to 108.9 thousand barrels per day. A similar performance will hamper the company’s first quarter numbers.

Earnings Whispers

Our proven model does not conclusively show that Encana 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 consensus estimates. 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 -50.00%. This is because the Most Accurate estimate stands at 2 cents, while the Zacks Consensus Estimate is pegged higher, at 4 cents.

Zacks Rank: Encana has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

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.

Stocks to Consider

While earnings beat looks uncertain for Encana, here are some energy firms you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

PBF Logistics L.P. (NYSE:PBFX) has an Earnings ESP of +10.91% and a Zacks Rank #1. The partnership is expected to release earnings results on May 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

Global Partners L.P. (NYSE:GLP) has an Earnings ESP of +233.33% and a Zacks Rank #1. The partnership is anticipated to release earnings on May 9.

NOW Inc. (NYSE:DNOW) has an Earnings ESP of +17.39% and a Zacks Rank #2. The company is likely to release earnings on May 3.

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