Anadarko Petrol: Zacks’ Bear of the Day Play

Anadarko Petrol (APCAnalyst Report) announced Q4 14 earnings after the bell last night, and they missed big.  The Zacks Consensus Earnings Estimate was at $0.82, but the company reported earnings of $0.37.  Further, the Zacks Consensus Revenue Estimate was set at $3.753 billion, but Anadarko posted revenues of $3.18 billion.  Declining oil prices are negatively impacting top lines across the industry, and APC is not being spared.  The stock dropped over 2% in afterhours trading Monday night.

 

As the earnings announcement approached APC saw some glimmers of hope as the stock price rose just around 3% in anticipation of solid results, but during the same period of time the Zacks Consensus Estimate was declining at a rapid pace.

Declining Estimates

Anadarko has been experiencing declining earnings estimates for the past three months, and they have continued to decrease up until a week ago (the most recent estimate numbers).  These negative estimate revisions have impacted estimates for Q4 14, Q1 15, FY 14, and FY 15.  The decline is due to a combination of declining oil prices, the increasing overall volume that is being produced, and the declining demand of the commodity worldwide.

Specifically, estimates have dropped for Q4 14 from $1.13 to $0.82 (company reported $0.37), Q1 15 dropped from $1.07 to $0.18, FY 14 dipped from $4.96 to $4.62, and FY 15 has plunged from $4.29 to $0.85.  Given the poor Q4 performance, we would not be surprised to see Anadarko’s estimates decline in the near future as well.

As you can see in the table below, Anadarko’s declining Estimate Consensus is driving the price down to 2010 levels.
Bottom Line

The oil sector is under severe pressure and companies like Anadarko are struggling to keep their top and bottom lines afloat. This significant miss and negative sediment going forward will put added pressure on company management to make difficult cost cutting measures.  Further, this segment should remain under pressure for the near to mid-term.

If you are inclined to invest in this segment, we would suggest looking at Midstates Petro (MPOSnapshot Report), and or Sabine Oil & Gas (SOGCAnalyst Report), both carrying a Zacks Rank #2 (Buy).

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