Will Low Prices Mar Range Resources' (RRC) Q3 Earnings?

For the third quarter, the company expects average production in the 1.39–1.40 billion cubic feet equivalent per day range, higher than the figure reported in the second quarter. Additionally, the company has reaffirmed its production growth guidance of 20% year over year. Increase in production should offset some of the pricing woes for the company.

However, Range Resources is a firm in the oil and gas exploration and production space, which makes its financials heavily dependent on commodity prices. Natural gas – nearly 70% of the company’s total production – traded at around $2.5 million Btu in the third quarter. This is substantially below the prior-year quarter average of about $3.7 million Btu. Oil prices also remained below $50 per barrel. As such, weak realizations are expected to significantly hamper revenues and earnings for Range Resources.

Earnings Whispers

Our proven model does not conclusively show that Range Resources is likely to beat earnings this quarter. That is because a stock needs to have both 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 for Range Resources is -14.29%. This is because the Most Accurate estimate is pegged at a loss of 16 cents, while the Zacks Consensus Estimate stands at a loss of 14 cents.

Zacks Rank: Range Resources carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP 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.

Stocks to Consider

Here are some companies to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Exterran Partners LP EXLP has an Earnings ESP of +19.23% and a Zacks Rank #1. The company is expected to release earnings on Nov 3.

Natural Gas Services Group Inc. NGS has an Earnings ESP of +21.05% and a Zacks Rank #1. The company is anticipated to release earnings on Nov 5.

Swift Energy Co. SFY has an Earnings ESP of +11.11% and a Zacks Rank #2. The company is likely to release earnings on Nov 5.

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