Is ConocoPhillips (COP) Poised to Beat Earnings Estimates?

We expect ConocoPhillips COP, an independent exploration and production company, to beat expectations when it reports second-quarter 2014 financial results before the opening bell on Jul 31, 2014.

Why a Likely Positive Surprise?

Our proven model shows that ConocoPhillips is likely to beat earnings because it has the right combination of two key components.
 
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.90%. This is a very meaningful and leading indicator of a likely positive earnings surprise for shares.

Zacks Rank: ConocoPhillips carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, 2 and 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, especially when the company is witnessing negative estimate revisions momentum.    
 
The combination of ConocoPhillips' Zacks Rank #2 and ESP of +1.90% makes us confident of an earnings beat in the coming week.

What is Driving the Better-Than-Expected Earnings?

ConocoPhillips' exploration initiatives toward liquids-rich plays are gaining momentum through the Eagle Ford, Bakken and North Barnett shale plays. This shift toward liquid-linked assets should bring in additional profits for the company, backed by favorable oil prices.

During its first-quarter financial results, ConocoPhillips anticipated second-quarter daily production – excluding Libya – in the band of 1,490–1,540 thousand barrels of oil equivalent (MBOE). The upper end of the band is higher than the year-ago quarter production of 1,510 MBOE. Moreover, ConocoPhillips expects to deliver 3–5% production growth in 2014.

Recently, ConocoPhillips announced a 5.8% increase in its quarterly dividend, which is the second hike since the spin-off of its downstream operations in 2012 to form Phillips 66 PSX. This reflects the company's strong financial position and positive growth outlook.

Moreover, the positive trend is seen in the trailing four-quarter average surprise of 10.5%, which was greatly helped by the 15.3% positive surprise in the last-reported quarter.  

Other Stocks to Consider

ConocoPhillips is not the only stock looking up this earnings season. We also see a likely earnings beat coming from these companies in the same sector:  

Mid-Con Energy Partners, LP MCEP has Earnings ESP of +2.22% and a Zacks Rank #1 (Strong Buy).

Comstock Resources Inc. CRK has Earnings ESP of +22.22% and a Zacks Rank #2.