Chesapeake Energy Corp. CHK has an Earnings ESP of +100.00% and a Zacks Rank #3.
BP plc (BP) Poised for Strong Q1 Earnings: What to Expect? - Analyst Blog
Zacks By Zacks Equity Research 2 hours ago
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Oil giant BP plc BP is expected to report first-quarter 2015 earnings on Apr 28, before the opening bell.
The company’s earnings history is a mixed bag. BP has beaten the Zacks Consensus Estimate in two of the trailing four quarters while missing the same in the other two. In the last reported quarter, the company delivered a negative earnings surprise of 9.76%. Let’s see how things are shaping up for this announcement.
Earnings Whispers
Our proven model shows that BP is likely to beat earnings because it has the perfect combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +25.00%. This is because the Most Accurate estimate stands at 30 cents, whereas the Zacks Consensus Estimate is pegged lower at 24 cents. This is a meaningful and leading indicator of a likely positive earnings surprise for this company.
Zacks Rank: BP carries a Zacks Rank #3 (Hold).The stocks with Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of BP’s Zacks Rank #3 and +25.00% ESP make us confident of an earnings beat this season.
What Will Drive the Better-than-Expected Earnings?
During the fourth quarter, BP’s earnings in Downstream rose substantially to $1,213 million from $70 million in the year-ago quarter. The improvement came on the back of a stronger refining environment as well as higher contribution from supply and trading activities. This is expected to continue through 2015.
BP’s upstream margins are likely to be driven by its four main upstream profit centers – Angola, Azerbaijan, the North Sea and the GoM. In 2015, BP expects to bring quite a few projects online. These projects are likely to increase the company’s margins going forward. For 2015, the company expects refining margins to improve from the 2014 level due to turnaround activity, which in turn will be reflected in the first-quarter earnings.
BP expects first-quarter 2015 production to be higher than fourth-quarter 2014, mainly reflecting increased entitlements on the basis of assumed lower oil prices. Increased production is expected to translate into higher income and hence earnings beat.
Moreover, the company’s strategy of offloading its non-core upstream properties while creating a portfolio with potentially stronger growth from a smaller base is likely to prove beneficial during the first quarter.
Stocks to Consider
Here are some companies from the same space which, according to our model, have the right combination of elements to post an earnings beat this quarter:
Marathon Petroleum Corp. MPC has an Earnings ESP of +1.77% and a Zacks Rank #1 (Strong Buy).
Spectra Energy Partners LP SEP has an Earnings ESP of +2.53% and a Zacks Rank #3.
Chesapeake Energy Corp. CHK has an Earnings ESP of +100.00% and a Zacks Rank #3.
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BP PLC (BP): Free Stock Analysis Report
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