Noble Energy (NBL): Stock To Beat Estimates In Q2 Earnings

We expect Noble Energy, Inc. (NYSE:NBL) to surpass expectations when it reports second-quarter 2016 results on Aug 3, before the opening bell.

Last quarter, the company posted a 1.85% positive earnings surprise, with an average positive surprise of 373.80% in the trailing four quarters. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Noble Energy is likely to beat estimates because it has the right combination of two key ingredients. 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 estimates, and Noble Energy has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate of and the Zacks Consensus Estimate, is +3.33%. This is because the Most Accurate Estimate is pegged at a loss of 29 cents while the Zacks Consensus Estimate stands at a loss of 30 cents. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank: Noble Energy’s Zacks Rank #2 when combined with a positive ESP, makes us reasonably confident of positive surprise this season.

Sell-rated stocks (#4 or #5), on the other hand, should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

What’s Driving the Better-than-Expected Results?

In the second quarter, oil prices rebounded from two-year lows, which will likely aid Noble Energy’s bottom line. Additionally, the company is pursuing extensive cost-cutting measures and non-core asset sales to improve cash flows and boost margins.Capital expenditure in the second quarter is expected to be sequentially flat at $374 million, marking a significant year-over-year decline.

The company expects second-quarter sales volumes to be approximately 425 thousand oil equivalents per day (Mboe/d) (up 3.7% from the previous guidance of 405–415 Mboe/d). Noble Energy raised the sales volume guidance mainly due to a consistently strong operating performance, along with significant contributions from the new wells in Eagle Ford shale, TX.

Other Stocks to Consider

Noble Energy is not the only company looking up this earnings season. We see likely earnings beats coming from these three industry peers as well.

Chesapeake Energy Corporation (NYSE:CHK) has an Earnings ESP of +10.00% and a Zacks Rank #2. It is scheduled to report earnings on Aug 4.

Devon Energy Corporation (NYSE:DVN) has an Earnings ESP of +4.55% and a Zacks Rank #2. It is expected to report earnings on Aug 2.

Northern Oil and Gas, Inc. (NYSE:NOG) has an Earnings ESP of +20.00% and a Zacks Rank #1.It is slated to report earnings on Aug 4.