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Cheasapeake (CHK) Q4 Earnings: A Disappointment in Store?

Chesapeake Energy Corporation CHK is slated to report fourth-quarter 2017 results on Feb 22, before the opening bell.

In the trailing three months, the company reported a positive earnings surprise of 20.00%. Chesapeake beat the Zacks Consensus Estimate in all the previous four quarters, the average positive earnings surprise being 21.57%.  
 

 

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

Which Way are Estimates Trending?

Let’s look at the estimate revisions to get a clear picture of what analysts are thinking about the company before earnings release.

The Zacks Consensus Estimate of 25 cents for fourth-quarter earnings has been revised upward over the last 30 days, with three firms being bullish and two firms taking a bearish stance. The figure reflects year-over-year growth of 257.1%.

Further, analysts polled by Zacks expect revenues of $1.23 billion, showing an improvement of 82.1% from the year-ago quarter.

Q4 Price Performance

During the quarter, Chesapeake’s shares have lost 7.9% against the industry’s 9% rally.



 

Factors Likely to Affect Results

Per the Zacks Consensus Estimate, Chesapeake’s production for the current quarter is pegged at 52 million barrels of oil equivalent (MMBoe/d), higher than 50 MMBoe/d in the preceding quarter.

The Zacks Consensus Estimate for oil production is 9.2 million barrels (MMbbls), showing an improvement of 8 MMbbls in the preceding quarter.

Analysts polled by Zacks expect natural gas production of 226 billion cubic feet (bcf), which shows an increase from 219 bcf in the preceding quarter.

The Zacks Consensus Estimate for natural gas liquids sales production is 5.21 MMbbls, up from 5 MMbbls in the preceding quarter.

The Zacks Consensus Estimate for average realized price of oil (including hedging) is $52 per barrel, flat sequentially.

Analysts polled by Zacks expect average realized natural gas price to rise 8% from the preceding quarter to $2.72 per thousand cubic feet (mcf).

Analysts polled by Zacks expect average realized natural gas liquids price to rise 15% from the preceding quarter to $24.44 per barrel. The upside in the oil and gas prices will benefit upstream players like Chesapeake.

Earnings Whispers

Our proven model does not show that Chesapeake 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, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -4.73%. This is because the Most Accurate estimate is 24 cents, while the Zacks Consensus Estimate is pegged at 25 cents. You can uncover the best stocks to buy or sell before they’re reported with our https://www.zacks.com/premium/esp-buy?adid=zp_article_espfil...">Earnings ESP Filter.     

Zacks Rank: Chesapeake carries a Zacks Rank #3.

Conversely, Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

Stocks to Consider
    
Here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to beat earnings this quarter.

Houston, TX-based EOG Resources EOG is a major independent oil and gas exploration and production company. The company has an Earnings ESP of +3.61% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Continental Resources CLR is an independent oil and natural gas exploration and production company. The company has an Earnings ESP of +1.86% and sports a Zacks Rank #1.

Headquartered in Woodlands, TX, Newfield Exploration NFX is an independent energy company engaged in the exploration and production of crude oil and natural gas. The company has an Earnings ESP of +1.64% and carries a Zacks Rank #3.

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Chesapeake Energy Corporation (CHK): Free Stock Analysis Report
 
Newfield Exploration Company (NFX): Free Stock Analysis Report
 
EOG Resources, Inc. (EOG): Free Stock Analysis Report
 
Continental Resources, Inc. (CLR): Free Stock Analysis Report
 
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