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Will Hess Corporation (HES) Disappoint this Earnings Season?

Hess Corporation HES, a global exploration and production (E&P) company, is expected to report second-quarter 2017 earnings on Jul 26, before the market opens.

Last quarter, the company had delivered an impressive 2.73% positive earnings surprise, courtesy of an uptick in oil prices. Also, Hess has an average positive earnings surprise of 8.23% for the last four quarters.  

Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Since the beginning of 2014, long-term debt load has been on the rise. Our proprietary model shows that from 2014 to 2016, the company’s long-term debt increased from nearly $5,500 million to almost $6,700 million.

Also, net cash flow from operations has been declining steadily over the last three years, reflecting weak operations owing to persistently low commodity prices.  

Oil and gas prices have been low for almost three years now and during second-quarter 2017, the prices of both the commodities deteriorated further. The prolonged weakness can be attributed to the supply glut in the commodity market. During the second quarter of 2017, oil and natural gas prices fell 8.4% and 5%, respectively. Hence, the OPEC’s historical production cut extension deal until Mar 2018 has failed to drive oil.

This development is not favorable for explorers like Hess as the company’s cashflow might get affected further.

Price Movement in Q2

Hess has lost 9% in the April-to-June quarter versus the 9.5% decline of the industry.

Earnings Whispers

Our proven model does not conclusively show a beat for Hess this quarter. That 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 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, is -2.50%. This is because the Most Accurate estimate stands at a loss of $1.23, while the Zacks Consensus Estimate is pegged at a loss of $1.20. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hess carries a Zacks Rank #4 (Sell). Please note that stocks with a Zacks Rank #4 or 5 (Strong Sell) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Boardwalk Pipeline Partners LP BWP has an Earnings ESP of +6.90% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada Corporation TRP, has an Earnings ESP of + 7.84% and a Zacks Rank #1.

C&J Energy Services Inc. CJ has an Earnings ESP of +100.00% and a Zacks Rank #3.

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Boardwalk Pipeline Partners L.P. (BWP): Free Stock Analysis Report
 
TransCanada Corporation (TRP): Free Stock Analysis Report
 
Hess Corporation (HES): Free Stock Analysis Report
 
C&J Energy Services, Inc. (CJ): Free Stock Analysis Report
 
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