What to Expect from Hercules Offshore's (HEROQ) Q3 Earnings?

Last quarter, the Houston, TX-based firm delivered a positive average surprise of 19.57% despite the challenges that a steep drop in oil price tagged along. This was primarily owing to strong cost control measures.

Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Oil price during the Jul–Sep 2015 quarter hovered mostly between $45 and $55 per barrel. This was considerably below the prior-year quarter level, when crude was trading around the $100 per barrel mark.

With the weakness in oil prices, the top energy companies have cut spending (particularly on the costly drilling projects) on the back of lower profit margins. This, in turn, has meant less work for the beleaguered drillers as offshore exploration for new oil and gas projects has almost come to a standstill.

However, to some extent, Hercules Offshore’s successful cost reduction initiatives are expected to lessen the negative impact on the results.

Earnings Whispers

Our proven model does not conclusively show that Hercules Offshore will beat estimates 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) to be able to beat consensus estimates. 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 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at a loss of 43 cents.

Zacks Rank: Hercules Offshore has a Zacks Rank #2 (Buy). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement.

Stocks to Consider

While earnings beat looks uncertain for Hercules Offshore, here are some companies you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

Exterran Partners L.P. EXLP has Earnings ESP of +19.23% and a Zacks Rank #1 (Strong Buy). The company is expected to release earnings on Nov 3.

Matrix Service Co. MTRX has Earnings ESP of +12.90% and a Zacks Rank #1. The company is likely to release earnings on Nov 4.

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

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