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Calumet Specialty (CLMT) Q3 Earnings: What's in the Cards?

Calumet Specialty Products Partners, L.P. CLMT is set to release third-quarter 2018 results, before the opening bell on Nov 9.

The partnership posted an average negative earnings surprise of 26.09% for the past four quarters. However, in the last reported quarter, this refining and marketing player’s earnings per unit of 8 cents surpassed the Zacks Consensus Estimate of 6 cents.

Which Way are Estimates Headed?

Let’s take a look at the estimate revision trend to get a clear picture of what analysts expect from the earnings release.

The Zacks Consensus Estimate for loss of 13 cents in the third quarter remained unchanged over the last seven days. It reflects that loss will likely become narrower by 56.7% from the year-ago quarter. 

Further, the consensus estimate for revenues stands at $794.6 million. However, it shows a 27.6% decline from the prior-year quarter.

Factors to Consider

Calumet Specialty is among the leading North American producers of premium specialty products of hydrocarbon. With several processing or refining plants, the partnership produces fuels — including gasoline, jet fuel and diesel — along with specialty products like lubricating oil, solvent and wax.

Given that gross domestic product (GDP) in the United States grew at a healthy pace of 3.5% through third-quarter 2018; impressive demand for end products should benefit the partnership.

Moreover, West Texas Intermediate crude at Midland basin and heavy Canadian crude — Western Canadian Select (“WCS”) — are trading at a big discount to U.S. oil, owing to pipeline bottleneck. Being the buyer of crude, Calumet Specialty will likely get benefit from low input cost.

However, the partnership has significant exposure to debt, which is creating headwinds. Total debt to capitalization ratio of Calumet Specialty stands at 96.2%, higher than 54.6% of the stocks belonging to the industry.

Earnings Whispers

Our proven model does not conclusively predict a beat for Calumet Specialty this earnings season. 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. That is not the case here as you will see below.

Earnings ESP: Earnings ESP of Calumet Specialty currently stands at 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate stand at loss of 13 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The partnership currently carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s earnings ESP of 0.00% makes surprise prediction difficult.

Meanwhile, we caution investors against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Though an earnings beat looks uncertain for Calumet Specialty, here are a few firms that you may want to consider, which have the right combination of elements to post an earnings beat this quarter:

QEP Resources, Inc. QEP has an Earnings ESP of +242.22% and a Zacks Rank #3. The company is slated to report third-quarter 2018 results on Nov 7.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Northern Oil and Gas, Inc. NOG has an Earnings ESP of +6.52% and a Zacks Rank #2. The company is slated to report third-quarter results on Nov 8.

TC PipeLines, LP TCP has an Earnings ESP of +13.29% and a Zacks Rank #1. The partnership is slated to report third-quarter 2018 results on Nov 9.

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