Weatherford International (WFT) Q2 Earnings: What's Up?

Leading oilfield services company Weatherford International Ltd. (NYSE:WFT) is expected to report second-quarter 2016 earnings on Jul 27, 2016.

The company has a mixed earnings history. Weatherford beat the Zacks Consensus Estimate in three and missed the same in one of the trailing four quarters. In the last reported quarter, the company delivered a negative earnings surprise of 11.54%.

Factors at Play

The measures undertaken by Weatherford to reduce expenses, both through direct cost reduction in view of the major downturn as well as by restructuring its overall cost structure, should result in a more efficient and better run company going forward. With revenue trends projected to surpass its peers, the company appears to be well poised for improved earnings performance in the second quarter.

Weatherford is aligning its organizational structure to keep up with the changing market conditions, which in turn, should significantly aid financials. The company is planning to shut down and consolidate several of its operating facilities across North America.

Though we believe that expenditure on exploration and production activity levels are gaining traction, the improvement might be partially offset by competitive pricing and continued margin pressure from excess capacity. In addition, Weatherford could face a more adverse impact than its peers, if the North American market underperforms. This is because a significant portion of its revenues comes from this region. Weatherford believes that the depressed natural gas and oil price environment will further hamper its earnings growth.

Moreover, Weatherford's debt-heavy balance sheet, it's inability to generate strong free cash flow as well as competition from larger peers are causes for concern.

Earnings Whispers

Our proven model does not conclusively show that Weatherford is likely to beat on earnings 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) for this to happen. 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, stands at 0.00%.

Zacks Rank: Weatherford carries a Zacks Rank #3. However, a 0.00% ESP makes earnings prediction difficult.

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

Stocks to Consider

Here are some companies from the same space, which according to our model, have the right combination of elements to post an earnings beat this quarter:

SunCoke Energy Inc. (NYSE:SXC) has Earnings ESP of +400.00% and a Zacks Rank #1. The company is expected to release earnings on Jul 28.

Chesapeake Energy Corporation (NYSE:CHK) has Earnings ESP of +12.50% and a Zacks Rank #2. The company is anticipated to release earnings on Aug 4.

Spectra Energy Corp. (NYSE:SE) has Earnings ESP of +40.00% and a Zacks Rank #1. The company is likely to release earnings on Aug 3.