Will Hurricane Harvey Hurt Devon Energy's (DVN) Q3 Earnings?

Will Hurricane Harvey Hurt Devon Energy's (DVN) Q3 Earnings?

Devon Energy Corporation DVN is slated to report third-quarter 2017 results after the market closes on Oct 31. In the second quarter, the company reported a positive earnings surprise of 3.03%. 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. Per the Zacks Consensus Estimate, the average daily production in the third quarter from the United States will be 412,000 barrels of oil (boe) per day.

Devon Energy estimates total production from its assets in the third quarter to be in the range of 526,000-546,000 boe per day compared with 536,000 boe achieved during the second quarter. However, Hurricane Harvey had an adverse impact on company’s production from Eagle Ford and adjoining areas. Devon expects its net U.S. liquids production to decline by 15,000 barrels per day in the third quarter due to the hurricane.

Total realized price including cash settlements at the end of second quarter was $24.94 per boe. The Zacks Consensus Estimate predicts total realized price for third quarter to be $24.75 boe, reflecting a drop of nearly 0.8% sequentially.

We expect the likely drop in production due to outages caused by Harvey and estimated fall in realized price to adversely impact financial performance of Devon Energy in the quarter.

Devon Energy Corporation Price and EPS Surprise

Devon Energy Corporation Price and EPS Surprise | Devon Energy Corporation Quote

Earnings Whispers

Our proven model does not conclusively show that Devon Energy is likely to beat 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 -4.76%. This is because the Most Accurate estimate is pegged at 40 cents, lower than the Zacks Consensus Estimate of 42 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 #3, when combined with a negative Earnings ESP makes a beat unlikely this quarter.

Note 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:

Earthstone Energy Inc. ESTE has an Earnings ESP of +49.99% and a Zacks Rank #1. The company is likely to release third-quarter earnings results on Nov 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

Noble Midstream Partners L.P. NBLX has an Earnings ESP of +1.91% and a Zacks Rank #1. The partnership is expected to report third-quarter earnings results on Oct 30.

Murphy Oil Corporation MUR has an Earnings ESP of +8.62% and a Zacks Rank #3. The company is likely to report third-quarter earnings numbers on Nov 1.

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Devon Energy Corporation (DVN): Free Stock Analysis Report

Earthstone Energy, Inc. (ESTE): Free Stock Analysis Report

Noble Midstream Partners LP (NBLX): Free Stock Analysis Report

Murphy Oil Corporation (MUR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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