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Can Cabot (COG) Spring a Surprise this Earnings Season?

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Upstream Energy firm Cabot Oil & Gas Corporation is set to report first-quarter 2017 results before the opening bell on Apr 28.

Headquartered in Texas, Cabot is independent oil and gas exploration company with producing properties mainly in the continental U.S. Coming to its earnings surprise history, Cabot has a dismal record. The company had reported a negative earnings surprise of 10.10% in the trailing four quarters.

Let’s see how things are shaping up for this announcement.

Factors at Play

Positive developments in the quarter have raised optimism about the prospects of the stock. On Feb 6, 2017, the Federal Energy Regulatory Commission approved the construction of Atlantic Sunrise project which will enable Cabot to deliver gas to the Transco mainline and receive higher realized prices for production. Many new pipelines have also come into service in western Pennsylvania and eastern Ohio. As a result, Cabot reported an uplift in estimated realized prices for January and February, which is likely to reflect positively in its earnings.

The company’s prolific Marcellus and Eagle Ford assets are expected to contribute positively to the earnings. Moreover, the company has managed to emerge from the industry downturn with a strong balance sheet. The company’s manageable leverage and high liquidity provides it with enough financial flexibility.

On the flip side, volatility commodity price movement is likely to affect the earnings. With natural gas prices trading barely above $3 per MMBtu and Cabot being one of the most gas-weighted E&Ps, the company's earnings and revenues are under pressure. Further, Cabot plans to incur a capital expenditure of $720 million in 2017 to drill 90 wells. This will affect the cash flow and might result in lower earnings. The company is also grappling with lawsuits with Dimock residents regarding water contamination case. This might affect the reputation and earnings adversely.

Earnings Whispers

Our proven model does not conclusively show that Cabot will beat estimates this quarter. That 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. That is not the case here as you will see 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 are both pegged at 17 cents.  You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Cabot currently carries a Zacks Rank #3 which when combined with a 0.00% ESP makes surprise prediction difficult.

Please note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some firms from the energy space that you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter.

NOW Inc. (DNOW - Free Report) is expected to release first-quarter earnings results on May 3. The company has an Earnings ESP of +17.39% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1  Rank stocks here.

Rowan Companies plc is expected to release first-quarter earnings results on May 2. The company has an Earnings ESP of +14.29% and a Zacks Rank #3.

Transocean Ltd. (RIG - Free Report) is expected to release first-quarter earnings results on May 3. The company has an Earnings ESP of +11.11% and a Zacks Rank #3.

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