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EQT Corporation's (EQT) Q2 Earnings: What's in Store? - Analyst Blog

Zacks Equity Research
Updated

EQT Corp. EQT is expected to report second-quarter 2015 earnings on Jul 23, before the market opens.

In the last quarter, the company’s earnings of $1.08 per share beat the Zacks Consensus Estimate of 64 cents. The bottom line, however, decreased 20% from $1.35 in the year-earlier quarter. Let’s see how things are shaping up prior to the announcement.

Factors Likely to Affect Earnings

EQT is a low-cost producer with a strategic midstream presence. The company's superior cost structure and above-average growth may ease concerns about struggling natural gas prices. With an increasing reserve structure and a higher number of Marcellus wells likely to be drilled in the next five years, we believe that the company will exhibit industry-leading organic growth momentum during the second quarter. This should, therefore, be reflected in the company’s soon to be released earnings.

The revised capital budget of $1.85 billion for EQT production lowers drilling of Marcellus and Permian wells by 59 and five, respectively. However, with 168 wells awaiting completion and 23 well in the pipeline, the company is well positioned to deliver on its original production growth of 1.6 billion cubic feet equivalent (Bcfe) per day by the end of 2015. Despite lowering its 2015 capital budget to $2.05 billion from $2.5 billion, the company maintained its earlier production target of 575–600 Bcfe. EQT is expected to continue delivering consistent production growth on the back of its E&P segment.

However, EQT remains highly exposed to volatile natural gas fundamentals and weak commodity prices, which might lead it to perform below our expectations.

EQT’s various multilateral drilling programs across its oil and gas fields face operational headwinds like rising service costs, completion delays and equipment failures. These may have an adverse effect on the company’s earnings.

Currently, EQT is drilling its first Pennsylvania Utica well in Greene County. The company faced higher-than-expected pressure during the initial phase of the drilling. A higher horsepower rig was then called to salvage the situation. This has unnecessarily delayed the drilling to quite an extent. Any more of such issues are likely to affect the company’s earnings going forward.

Earnings Whispers

Our proven model does not conclusively show that EQT Corp. is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 or 3 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 currently pegged at -1,000.00%. The Most Accurate estimate for EQT Corp. stands at a loss of 9 cents, while the Zacks Consensus Estimate is pegged higher at 1 cent.

Zacks Rank: EQT Corp. carries a Zacks Rank #3 (Hold). Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of -1,000.00% 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.

Other Stocks to Consider

Here are some other companies from the energy sector that, according to our model, have the right combination of elements to post an earnings beat this quarter:  

Marathon Petroleum Corporation MPC has an Earnings ESP of +1.14% and a Zacks Rank #2 (Buy).

Valero Energy Corporation VLO has an Earnings ESP of +2.13% and a Zacks Rank #3.

Hess Corporation HES has an Earnings ESP of +11.84% and a Zacks Rank #3.
 


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