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What's in the Cards for Ensco (ESV) This Earnings Season?

Zacks Equity Research
Updated

Ensco plc ESV is scheduled to report second-quarter 2018 results on Jul 26, before the opening bell.

In the last reported quarter, the company reported a negative earnings surprise of 28%. However, Ensco delivered an average positive earnings surprise of 17.2% in the last four quarters.
 

Ensco plc Price and EPS Surprise

Ensco plc Price and EPS Surprise | Ensco plc Quote

Which Way Are Estimates Treading?

Let’s take a look at the estimate revisions to get a clear picture of analyst’s opinion on the stock before the earnings release.

The Zacks Consensus Estimate of a loss of 33 cents for the second quarter witnessed no upward revision but one downward movement in the past 30 days. The estimated figure reflects a year-over-year plunge of 230%.

Further, the Zacks Consensus Estimate for revenues is projected at $453.1 million for the second quarter, which reflects a fall of 1% from the year-ago quarter’s tally.

Factors to Consider

The Zacks Consensus Estimate for revenues from the floaters segment is pegged at $263 million, up from $259 million in the last reported quarter. During the first quarter, Ensco’s revenues declined 9.1%, while utilization decreased to 44% from 47%, both on a year-over-year basis. Average day rates fell to $263,000 from $337,000 in the year-ago quarter. Moreover, contract drilling expense increased from the year-ago quarter and is likely to mar the upcoming quarterly results.

The Zacks Consensus Estimate for revenues from the jack ups segment is pegged at $167 million, reflecting a rise from $143 million in the year-ago quarter. The addition of new jack ups to the fleet from the acquisition of Atwood is likely to add to the revenues in the coming quarters. However, it is anticipated to be offset by increased costs.

In 2017, the company generated negative free cash flow of $275 million against $765 million of positive cash flow during 2016. We believe that reduced rig utilizations and significant lower average day rates will continue to hurt Ensco’s free cash flow in the future.

Q2 Price Performance

During the quarter, the company’s shares gained 65.4% compared with the industry’s 19.4% rise.


Earnings Whispers

Our proven model does not show that Ensco is likely to beat estimates this quarter. That is because a stock needs to have 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 for the company is -1.93% as the Most Accurate Estimate is a loss of 34 cents, while the Zacks Consensus Estimate is pegged at a loss of 33 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: Ensco carries a Zacks Rank #3.

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

Stocks to Consider

Though earnings beat looks uncertain for Ensco, here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:

ConocoPhillips COP, based in Houston, TX, is a major global exploration and production (E&P) company. The company has an Earnings ESP of +6.54% and flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Occidental Petroleum Corporation OXY is an international oil and gas exploration and production company. The company has an Earnings ESP of +2.82% and carries a Zacks Rank #2.

Houston, TX-based EOG Resources, Inc EOG is a major independent oil and gas exploration and production company. The company has an Earnings ESP of +1.36% and a Zacks Rank #2.

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Ensco plc (ESV) : Free Stock Analysis Report
 
EOG Resources, Inc. (EOG) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
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