Will CONSOL (CNX) Beat Earnings Estimates On E&P Focus?

We expect coal and natural gas producer CONSOL Energy (NYSE:CNX) to beat expectations when it reports second quarter 2016 results on Jul 26 before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that CONSOL Energy is likely to beat earnings because it has the right combination of two key ingredients. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is the case here as you will see below.

Positive Zacks ESP: Earnings ESP is at +22.73%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks #2 Rank: The combination of CONSOL’s Zacks Rank #2 and +22.73% ESP makes us confident of an earnings beat this season.

The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.

What is Driving the Better Than Expected Earnings?

CONSOL Energy’s increasing focus on natural gas operation and cost savings will be the driving force behind its performance in the second quarter. Its E&P Division is well positioned to grow production in the second quarter by 15% year over year. The company will also continue to generate free cash flow.

During the quarter, the company further lowered its coal assets by signing an agreement to sell its Buchanan Mine in southwestern Virginia, and certain other metallurgical coal reserves to Coronado IV LLC for $420 million. This improvement in liquidity will help the company to lower its debt levels.

Stocks to Consider

At present, other than CONSOL Energy, we have found none related to the coal industry worth considering on the basis of our model, which shows that it has the right combination of elements to post an earnings beat this quarter.

Here are a few companies from the Energy Sector poised for an earnings beat.

Anadarko Petroleum Corporation (NYSE:APC) has an earnings ESP of +1.33% and carries a Zacks Rank #2. It is expected to report earnings on Jul 26, 2016.

Murphy Oil Corporation (NYSE:MUR) has an earnings ESP of +13.51% and carries a Zacks Rank #2. It is expected to report earnings on Jul 27, 2016.

ConocoPhillips (NYSE:COP) has an earnings ESP of +5.45% and carries a Zacks Rank #2. It is expected to report earnings on Jul 28, 2016.

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