We expect ConocoPhillips (NYSE: 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 (NYSE: 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:
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Mid-Con Energy Partners, LP (NASDAQ: MCEP) has Earnings ESP of +2.22% and a Zacks Rank #1 (Strong Buy).
Comstock Resources Inc. (NYSE: CRK) has Earnings ESP of +22.22% and a Zacks Rank #2.
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CONOCOPHILLIPS (NYSE: COP): Free Stock Analysis Report
COMSTOCK RESOUR (NYSE: CRK): Free Stock Analysis Report
PHILLIPS 66 (NYSE: PSX): Free Stock Analysis Report
MID-CON ENERGY (NASDAQ: MCEP): Free Stock Analysis Report
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