Apache (APA): Is Disappointment Due this Earnings Season?

Last quarter, the company delivered a positive earnings surprise of 168.75%. On top of that, the companyoutperformed the Zacks Consensus Estimate in the preceding four quarters, with an average beat of 62.47%. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Houston, TX-based Apache is one of the world's leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. All these activities are positively correlated with oil and natural prices and hence the weak commodity pricing environment during the third quarter will likely hurt the company’s third-quarter results.

To support this fact, we note West Texas Intermediate (WTI) crude mostly traded below $50 per barrel in the July to September period. In fact, sometimes the commodity even traded below $40 per barrel. Moreover, the natural gas pricing environment was not favorable.

Earnings Whispers

Our proven model does not conclusively show that Apache is likely to beat results 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: The company has an Earnings ESP of -7.90%. This is because the Most Accurate estimate stands at a loss of 41 cents, while the Zacks Consensus Estimate is pegged narrower at a loss of 38 cents.

Zacks Rank: Apache carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. But a negative ESP makes our surprise prediction difficult.   

We caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into the announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Natural Gas Services Group Inc. NGS with an Earnings ESP of +11.11% and a Zacks Rank #1 (Strong Buy). The company is anticipated to release earnings results on Nov 5.

Swift Energy Co. SFY has an Earnings ESP of +11.11% and a Zacks Rank #3 (Hold). The company is likely to release earnings results on Nov 5.

Seadrill Partners LLC SDLP has an Earnings ESP of +12.00% and a Zacks Rank #1. The partnership is expected to release earnings results on Nov 25.

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