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Is a Beat Likely for Concho Resources (CXO) in Q4 Earnings?

Zacks Equity Research
·4-min read

Concho Resources Inc. CXO is scheduled to release fourth-quarter 2019 results on Tuesday Feb 18, after the closing bell.

The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at 77 cents per share on revenues of $1.16 billion. There has been no change in estimates for the bottom line over the past 7 days.

Against this backdrop, let’s delve into the factors that might have impacted the company’s performance in the December quarter.

Factors at Play

Concho Resources’ two major areas of interest, such as output growth and oil price realizations are giving off positive vibes for its upcoming quarterly release.

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The Zacks Consensus Estimate for fourth-quarter production volumes is pegged at average 325,265 barrels of oil equivalent per day (Boe/d), indicating a 5.9% improvement from 307,097 BOE/d reported in the year-ago quarter. This strong output projection is suggestive of the synergies that might have been drawn from the 2018 RSP Permian acquisition.

Moreover, the Zacks Consensus Estimate for realized crude prices implies a rise from the year-ago reported figure, which in turn, indicates a possible rise in the company’s profitability during the fourth quarter. The Zacks Consensus Estimate for the average crude price realization (without derivatives) stands at $56 per barrel, hinting at 14.1% growth from the year-earlier reported.

Importantly, Concho Resources’ output is heavily oil-weighted with liquids accounting for around 63% of its total production. Therefore, this ‘oilier’ nature of the company’s volume mix along with its robust commodity price realization is likely to boost its upcoming earnings results.

 What Does Our Model Say?

The proven Zacks model predicts an earnings beat for Concho Resources this season. The right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Concho Resources has an Earnings ESP of +3.01%.

Zacks Rank: Concho Resources carries a Zacks Rank #3, which increases the predictive power of ESP.

Highlights of Q3 Earnings

In the last reported quarter, Concho Resources posted net income per share (excluding special items) of 61 cents, lagging the Zacks Consensus Estimate of 66 cents and falling significantly below the prior-year period’s $1.42. This underperformance can be attributed to lower commodity price.

However, the Permian-focused player generated revenues of $1.1 billion, topping the consensus mark by 2.9% owing to higher-than-anticipated production volumes. However, the top line fell 6.5% from the year-ago level.

Precisely, this upstream player’s output of 329,803 barrels of oil equivalent per day (Boe/d) surpassed the Zacks Consensus Estimate of 323,541 Boe/d.

As far as earnings surprises are concerned, this Midland, TX-based oil and gas producer missed the Zacks Consensus Estimate in all the trailing four quarters, the average being 7.57%. This is depicted in the graph below:

Concho Resources Inc. Price and EPS Surprise

Concho Resources Inc. Price and EPS Surprise
Concho Resources Inc. Price and EPS Surprise

Concho Resources Inc. price-eps-surprise | Concho Resources Inc. Quote

Other Stocks to Consider

Here are some other stocks worth considering from the energy space, which per our model have the perfect combination of elements to also beat on earnings this reporting cycle:

Noble Corporation NE has an Earnings ESP of +7.26% and a Zacks Rank of 3. The company is slated to announce fourth-quarter 2019 earnings on Feb 19.

Williams Companies, Inc. WMB has an Earnings ESP of +6.78% and is Zacks #3 Ranked. The company is slated to announce fourth-quarter 2019 earnings on Feb 19.

Energy Transfer, L.P. ET has an Earnings ESP of +4.86% and is a #3 Ranked stock. The partnership is slated to release fourth-quarter earnings on Feb 19. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Concho Resources Inc. (CXO) : Free Stock Analysis Report
 
Williams Companies, Inc. (The) (WMB) : Free Stock Analysis Report
 
Noble Corporation (NE) : Free Stock Analysis Report
 
Energy Transfer LP (ET) : Free Stock Analysis Report
 
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Zacks Investment Research