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Core Laboratories (CLB) Q3 Earnings: Stock to Disappoint?


Oilfield services company Core Laboratories N.V. CLB is set to release third-quarter 2016 results after the closing bell on Wednesday, Oct 19.

In the preceding three-month period, this Amsterdam, Netherlands-based firm reported earnings in line with the Zacks Consensus Estimate. In fact, in each of the last four quarters, Core Laboratories has posted earnings in line with estimates.

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

Factors to Consider This Quarter

Core Laboratories is an oilfield services company that provides reservoir management and production enhancement services to the global oil and gas industry. The company, like its peers, has been affected by the sharp fall in commodity prices.

WTI crude oil is presently trading around $50 per barrel, much lower than the $90–$100 per barrel mark touched just a few years ago. Weak commodity prices have prompted upstream firms to lower capital spending, which has resulted in lesser work for the likes of Core Laboratories.

CORE LABS NV Price and EPS Surprise

Additionally, Core Laboratories' third-quarter earnings and revenues are likely to deteriorate year over year. For the third quarter, the company expects earnings per share in the 39–41 cents range, much lower than the prior-year quarter figure of 83 cents. Moreover, revenues for the third quarter are expected between $148 million and $151 million, again well below the year-ago sales figure of $197.3 million.

Lastly, Core Laboratories banks on its ability to develop and acquire essential products and technologies that drive its operational performance and growth. If its technologies and/or products become obsolete or cannot be brought to market in a timely and competitive manner, the company may face severe operational and financial dilemmas.

Earnings Whispers

Our proven model does not conclusively show that Core Laboratories will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP:The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 39 cents.

Zacks Rank:Core Laboratories’ Zacks Rank #4 (Sell) when combined with a 0.00% ESP makes an earnings beat prediction uncertain. In addition, the Sell-rated stocks (Zacks Rank #4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Although an earnings beat looks uncertain for Core Laboratories, here are some firms that 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.

CONE Midstream Partners LP CNNX is expected to release earnings results on Nov 4. The partnership has an Earnings ESP of +2.70% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CSI Compressco LP CCLP has an Earnings ESP of +40.00% and a Zacks Rank #2. The company is anticipated to release earnings on Nov 4.

Antero Midstream Partners LP AM has an Earnings ESP of +2.94% and a Zacks Rank #2. The company is likely to release earnings on Oct 26.

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