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Hess (HES) Gears Up for Q3 Earnings: What's in the Cards?

Zacks Equity Research

Hess Corporation HES is set to release third-quarter 2019 results on Oct 30, 2019.

The company beat earnings estimates in all the trailing four quarters, with the average surprise being 258.5%.

Hess Corporation Price and EPS Surprise

Hess Corporation Price and EPS Surprise
Hess Corporation Price and EPS Surprise

Hess Corporation price-eps-surprise | Hess Corporation Quote

Let’s see how things have shaped up for this announcement.

Which Way are Estimates Trending?

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

The Zacks Consensus Estimate of a loss of 32 cents for the third quarter has seen one upward movement and six downward revisions by firms in the past 30 days. The figure indicates a 184.2% year-over-year plunge from the year-ago quarter.

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The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.6 billion, suggesting a decline of 13.5% from the year-ago reported figure.

Factors at Play

Being heavily involved in upstream operations, Hess’ earnings and revenues are directly related to commodity prices. Notably, the WTI crude price in third-quarter 2019 was lower than the year-ago period. In July, August and September, WTI averaged $57.35, $54.81 and $56.95 per barrel, respectively, per the U.S. Energy Information Administration. In comparison, WTI had averaged $70.98, $68.06 and $70.23 per barrel, respectively, in the comparable three months of 2018. The year-over-year decline in crude prices might have held back the company from unlocking its true potential of earning huge profits from upstream businesses, given an oil-heavy portfolio.

Notably, the Zacks Consensus Estimate for worldwide average natural gas prices (including hedging) is $3.93 per thousand cubic feet, indicating fall from $4.11 a year ago.  Moreover, average natural gas liquids prices (including hedges) in the United States are expected to be $11.28 per barrel, pointing to a decline from the year-ago reported figure of $24.29.

The Zacks Consensus Estimate for third-quarter total production is pegged at 287 thousand barrels of oil equivalents per day (MBoe/d), implying fall from the year-ago reported figure of 297 Mboe/d.

The year-over-year fall in overall production volumes and declining commodity prices might have dampened the company’s growth in the third quarter of 2019.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Hess this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here as you will see below.

Earnings ESP: Earnings ESP for the company is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at a loss of 32 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hess currently carries a Zacks Rank #3.

Q2 Earnings Highlight

In the last reported quarter, the company reported loss per share of 9 cents, narrower than the Zacks Consensus Estimate of a loss of 10 cents and the year-ago quarter’s loss of 23 cents, primarily due to higher hydrocarbon production, backed by prolific plays like Bakken and Gulf of Mexico.

Energy Stocks With Favorable Combination

While earnings beat looks uncertain for Hess, here are some companies from the energy space that you may want to consider on the basis of our model, which shows that these have the right combination of elements to deliver an earnings beat in the upcoming quarterly reports:

Targa Resources, Inc. TRGP has an Earnings ESP of +4.69% and a Zacks Rank of 2. The company is slated to announce third-quarter 2019 earnings on Nov 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rattler Midstream LP RTLR has an Earnings ESP of +13.76% and a Zacks Rank of 3. The company is slated to announce third-quarter 2019 earnings on Nov 5.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +5.93% and is a #3 Ranked player. The company is scheduled to release third-quarter 2019 earnings on Nov 5.

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