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Weatherford (WFT) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research
Updated

Weatherford International Ltd. WFT is expected to report second-quarter 2018 earnings on Jul 27, after the closing bell.

In the last reported quarter, the leading oilfield services company delivered positive earnings surprise of 13.6%. Weatherford posted average negative earnings surprise of 8.8% in the trailing four quarters.
 

Weatherford International PLC Price and EPS Surprise

 

Weatherford International PLC Price and EPS Surprise | Weatherford International PLC Quote

Let’s see how things are shaping up prior to the announcement.

Factors Likely to Influence Results

The commodity pricing scenario is expected to bring about substantial improvement in second-quarter 2018 results. Oil and gas prices were around $70 per barrel in all the three months. The average monthly price of West Texas Intermediate (WTI) crude per barrel for April, May and June 2018 was recorded at $66.25, $69.98 and $67.87, respectively, per the U.S. Energy Information Administration. The rally in crude was primarily supported by consistent production curbs from OPEC and allies.

Additionally, start of fresh U.S. oilfield services contracts, post the rise in oil prices, will favor growth.

However, Weatherford’s long-term debt rose more than 26% in 2016 and almost 2% during 2017. Cash and cash equivalents fell 40.9% during January-December period of 2017. The rise in debt load and the decline in cash balances reflect significant balance sheet weaknesses. In fact, Weatherford’s debt-to-capitalization ratio of 84.5% is significantly higher than the industry’s 56.6%.

Earnings Whisper

Our proven model does not show that Weatherford is likely to beat estimates this quarter. This 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.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +4.74%. The Most Accurate Estimate is a loss of 17 cents, while the Zacks Consensus Estimate is pegged at a loss of 18 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Weatherford has a Zacks Rank #4 (Sell).

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

Q2 Price Performance

During the quarter, Weatherford’s shares gained 43.6% compared with 18.4% rally of the industry.

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Stocks to Consider

Though earnings beat looks uncertain for Weatherford, 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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Weatherford International PLC (WFT) : 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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