Will Low Rig Activity Hit Helmerich & Payne (HP) Q3 Earnings? - Analyst Blog

Contract drilling services provider Helmerich & Payne Inc. HP is expected to release its fiscal third-quarter 2015 results before the opening bell on Thursday, Jul 30.

The company reported mixed earnings in the past that beat the Zacks Consensus Estimate in two of the trailing four quarters and missed the other two. In the last quarter, Helmerich & Payne reported better-than-expected earnings. The strong performance was aided by robust results from its U.S. Land Operations.

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

Factors to Consider

Helmerich & Payne is engaged in the contract drilling of oil and gas wells in the U.S. and internationally. The U.S. rig count has seen a significant drop owing to weak oil and natural gas prices. This is expected to affect financials for the likes of Helmerich & Payne.

Helmerich & Payne had anticipated rig revenue days for its U.S. Land Operations business unit to deteriorate by 32% in the third quarter. Rig revenues and utilizations are expected to witness a sharp decline, which would likely result in reduced earnings for the company.

Moreover, a large number of brokerage firms have lowered third quarter and full-year earnings estimates for Helmerich & Payne, thereby suggesting further bearishness ahead. The company’s third-quarter earnings estimate is currently pegged at 17 cents per share, a sharp decline from the year-ago quarter reported figure of $1.61.

Earnings Whispers

Our proven model does not conclusively show that Helmerich & Payne 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, 2 or 3 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 5.88%. The Most Accurate estimate for Helmerich & Payne stands at 18 cents while the Zacks Consensus Estimate is pegged lower at 17 cents.   
 
Zacks Rank: Helmerich & Payne carries a Zacks Rank #5 (Strong Sell).

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

While earnings beat looks uncertain for Helmerich & Payne, here are some firms, which have the right combination of elements to post an earnings beat this quarter:  

Linn Energy, LLC LINE has an Earnings ESP of +133.33% and a Zacks Rank #1 (Strong Buy). The company is expected to release earnings on Jul 30.

Tallgrass Energy Partners, LP TEP has an Earnings ESP of +10.64% and a Zacks Rank #1. The company is slated to release earnings on Jul 30.

Marathon Petroleum Corporation MPC has an Earnings ESP of +1.12% and a Zacks Rank #2 (Buy). The company is slated to release earnings on Jul 30.

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HELMERICH&PAYNE (HP): Free Stock Analysis Report
 
LINN ENERGY LLC (LINE): Free Stock Analysis Report
 
MARATHON PETROL (MPC): Free Stock Analysis Report
 
TALLGRASS ENRGY (TEP): Free Stock Analysis Report
 
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