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Will Devon’s (DVN) Q4 Earnings Gain From Higher Prices?

Zacks

Devon Energy Corporation DVN is slated to report fourth-quarter 2017 results after the market closes on Feb 20. In the third quarter, the company reported a positive earnings surprise of 17.95%. Let’s see how things are shaping up for this earnings season.

Factors to Consider

Devon Energy’s production is driven by contribution from its domestic-resource plays and the company is shifting focus toward high margin production regions. Per the Zacks Consensus Estimate, the average daily production in the fourth quarter from the United States is pegged at 423,000 barrels of oil equivalent (boe) per day.

Devon Energy estimates total production from its assets in the quarter to be in the range of 551,000-571,000 boe per day compared with 527,000 boe achieved during the prior quarter. Post Hurricane Harvey, the company’s operations have been restored to normal levels and U.S. oil production in the final quarter of 2017 is expected to be 20% higher than the fourth-quarter 2016 levels.

In addition to improvement in volumes, the company is anticipated to gain from the improving commodity prices. Total realized price, including cash settlements at the end of the third quarter, was $26.19 per boe. The Zacks Consensus Estimate projects total realized price for the fourth quarter to be $28 boe, reflecting an increase of nearly 6.9% sequentially.

The company will also benefit from its cost-reduction initiatives which will have a positive impact on margin in the quarter to be reported.

Earnings Whispers

Our proven model does not conclusively show that Devon Energy is likely to beat on earnings this quarter as it does not possess the key components. 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. However, that is not the case here as you will see below.

Zacks ESP: The company’s Earnings ESP is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at 60 cents.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.


Zacks Rank: Devon Energy’s Zacks Rank #1, when combined with Earnings ESP of 0.00%, makes a beat unlikely this quarter.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks With Favorable Combination

Here are some companies from the same industry you may want to consider that have the right combination of elements to post an earnings beat:

EOG Resources, Inc. EOG has an Earnings ESP of +4.06% and a Zacks Rank #1. The company is likely to report fourth-quarter earnings numbers around Feb 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

SilverBow Resources, Inc. SBOW has an Earnings ESP of +4.59% and a Zacks Rank #1. The company is slated to report fourth-quarter earnings results on Mar 1.

WildHorse Resource Development Corporation WRD has an Earnings ESP of +4.55% and a Zacks Rank #1. The company is set to release fourth-quarter earnings results on Mar 7.

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