The world’s largest oilfield services provider Hess Corporation (HES) is scheduled to report its fourth quarter and full year 2011 results on January 25, 2012, before the opening bell.
The Zacks Consensus Estimate for the to-be-reported quarter is a profit of $1.34 per share on revenues of $9.2 billion. For the full year, our earnings per share projection is $6.06 on revenues of $36.7 billion.
Third Quarter 2011 Recap
Hess’ third-quarter 2011 results were lower than expected with earnings per share of $1.11 per share considerably lagging the Zacks Consensus Estimate of $1.40. The quarterly result was also below the adjusted year-earlier earnings of $1.31. The underperformance was mainly due to lower production realized in the reported quarter.
Total revenue slid 2.5% year over year to $8,726 million in the quarter, and failed to meet the Zacks Consensus Estimate of $10,596 million.Agreement of Analysts
Analysts exhibit a cautious sentiment for Hess in the upcoming quarter based on its gas/oil price volatility, high drilling costs, project delays and weak macro backdrop.
For the fourth quarter, out of the 12 analysts covering the stock, 8 analysts have lowered their estimates, while only 1 has raised the same in the last 30 days. In the last 7 days, only 3 analysts have revised the estimate downward while none of the analysts moved in the opposite direction.
For fiscal 2011, 7 analysts (out of 12 analysts) decreased their estimates and one analyst has increased the projection over the past one month. In the last seven days, 3 analysts have lowered the estimate and none raised the same.
Magnitude of Estimate Revisions
Taking into effect the analysts’ earnings revision, the Zacks Consensus Estimate for the fourth quarter dropped to $1.34 from $1.51 recorded 30 days back. For the full year, estimate went down to $6.06 from $6.22, over the last one month.
About a week ago, the estimates were $1.38 and $6.10 for the quarter and year, respectively.
The company has a history of negative earnings surprises, lagging the Zacks Consensus Estimate in each of the last 4 quarters. The company recorded a minimum surprise of negative 1.62% in first quarter 2011 to a maximum of negative 20.7% in third quarter 2011. On an average, the earnings surprise stood at negative 8.4%.
Hess shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
We believe that Hess has a competitive advantage over its peers based on improving fundamentals, commodity price leverage and exposure to areas with high resource potential (such as Brazil, Ghana, Libya and offshore Australia). We continue to see an upstream momentum on the back of the company's large inventory of exploration and development projects.
However, despite having a downstream business, the company’s earnings are heavily exposed to the exploration and production segment, which is inherently risky, often with an equal share of success and failure.
Another prominent energy firm, ConocoPhillips (COP) will also report its fourth quarter earnings tomorrow.