Noble Corporation (NE): What's Up This Earnings Season?

Noble Corporation plc (NYSE:NE) is expected to report third-quarter 2016 earnings on Nov 3, after the market closes.

Last quarter, the company posted negative earnings surprise of 85.71%. In the last four quarters, Noble Corporation posted an average negative surprise of 18.63%. Let’s see how things are shaping up for this announcement.

Factors Likely to Affect Earnings

The pricing scenario for natural gas was much better in the third quarter, both on a sequential and an annualized basis. However, oil prices were weaker than the July-September quarter of 2015. Despite the persistent weakness in crude, the commodity price improved significantly from the mid-February lows. The improvement in commodity prices is undoubtedly favorable for upstream energy players as these firms would now be able to carry on exploration and production activities by hiring more drillers.

This is evidenced by the substantial increase in the U.S. rig count in recent times. In fact, Baker Hughes Inc. (BHI) – the company’s data issued since 1944 is as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry – declared the rig count for Sep 2016. In the U.S., the total number of rigs increased from the Aug 2016 count owing to a rise in the number of land rigs. This represents the fourth consecutive increase in the U.S. monthly rig count.

The developments in this front will likely be favorable for drillers like Noble Corporation.

Earnings Whispers

Our proven model does not conclusively show that Noble Corporation is likely to beat earnings 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. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Earnings ESP for Noble Corporation is -15.79%. This is because the Most Accurate estimate stands at a loss of 22 cents while the Zacks Consensus Estimate is pegged narrower at a loss of 19 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Noble Corporation holds a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks from the same industry that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

Vertex Energy Inc. (NASDAQ:VTNR) , which is expected to release earnings results on Nov 3, has an Earnings ESP of +37.50% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources Inc. (NYSE:EOG) has an Earnings ESP of +3.33% and a Zacks Rank #3. The company is expected to release third-quarter earnings results on Nov 3.

Enbridge Inc. (NYSE:ENB) has an Earnings ESP of +27.59% and a Zacks Rank #1. The company is expected to release third-quarter earnings results on Nov 3.

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