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Cabot Oil & Gas (COG): What to Expect in Q4 Earnings?

Upstream energy firm Cabot Oil & Gas Corporation COG is set to release fourth-quarter 2015 financial results before the opening bell on Feb 19.  

In the last reported quarter, the company failed to meet the Zacks Consensus Estimate by 1 cent.

The company reported an average earnings surprise of 40.22% for the last four quarters. Let’s see how things are shaping up for this announcement.    
 
Factors to Consider

Cabot Oil & Gas’ diversified asset portfolio is spread between low-risk/long reserve-life Appalachian assets and large-volume/rapid-payout Gulf Coast properties. This has resulted in a broad mix of production and payout profiles, thereby reducing the company’s risk profile. This should reflect positively on the upcoming earnings.

Also, Cabot has hedged a considerable portion of its projected 2015 natural gas production at very attractive prices. This has lowered the company’s near-term commodity-price exposure, which is a key positive for Cabot’s risk profile, given the current market conditions.

However, Cabot has projected lower-than-expected production volumes for the fourth quarter. It has also slashed the capital spending guidance for 2016 by half. With crude prices trading below $30 per barrel, Cabot has been able to extract less value for its products. This has pressured the group’s profit margins.

 
Earnings Whispers

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Our proven model does not conclusively show that Cabot Oil & Gas is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at a loss of 2 cents.

Zacks Rank: Cabot Oil & Gas has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.

McDermott International Inc. MDR has Earnings ESP of +28.57% and a Zacks Rank #2. The company is expected to release earnings results on Feb 22.

Summit Midstream Partners, LP SMLP has Earnings ESP of +50% and a Zacks Rank #2. The company is slated to release earnings results on Feb 25.

Alon USA Energy, Inc. ALJ has Earnings ESP of +73.33% and a Zacks Rank #3. The company is likely to release earnings results on Feb 24.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
MCDERMOTT INTL (MDR): Free Stock Analysis Report
 
ALON USA ENERGY (ALJ): Free Stock Analysis Report
 
CABOT OIL & GAS (COG): Free Stock Analysis Report
 
SUMMIT MIDSTRM (SMLP): Free Stock Analysis Report
 
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Zacks Investment Research