Contract drilling services provider Helmerich & Payne Inc. HP is expected to release its fiscal second-quarter 2015 results before the opening bell on Thursday, Apr 23.

The company reported mixed earnings in the past beating the Zacks Consensus Estimate in two of the trailing four quarters and missing 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 and Offshore Operations segments.

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. This makes the firm susceptible to commodity price weakness, which in turn, might affect earnings.

During its fiscal first-quarter result announcement, the company had provided a gloomy outlook for the second quarter. It expected activity in the U.S. land segment to decline by 25% sequentially during the fiscal second quarter. Moreover, the average rig revenue per day is likely to fall to the $27,000–$27,500 range.

Moreover, the international land segment is expected to experience a fall of 10–15% in revenue days and average rig margin per day is expected to decrease by 25–30%.

Further, the company had expected average rig costs to increase during the second quarter. Lower revenues and higher costs are expected to hamper earnings for the firm.

However, Helmerich & Payne’s strong backlog position does offer some cushion against the currently weak pricing environment.

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 (Expected Surprise Prediction) 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 -1.25%. The Most Accurate estimate for Helmerich & Payne stands at 79 cents while the Zacks Consensus Estimate is pegged higher at 80 cents.   
 
Zacks Rank: Helmerich & Payne carries a Zacks Rank #3 (Hold). Though a Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of -2.53% 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

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:  

Suncor Energy Inc. SU has an Earnings ESP of +400.00% and a Zacks Rank #2 (Buy). The company is expected to release earnings on Apr 29.

Whiting Petroleum Corp. WLL has an Earnings ESP of +6.90% and a Zacks Rank #2. The company is slated to release earnings on Apr 29.

Cenovus Energy Inc. CVE has an Earnings ESP of +58.82% and a Zacks Rank #2. The company is slated to release earnings on Apr 29.