In the last quarter, SeaDrill delivered a positive earnings surprise of 220% on the back of cost-cutting initiatives and strong economic utilization of fleets. The company surpassed estimates in each of the last four quarters with an average positive surprise of 97.13%. Let’s see how things are shaping up for this announcement.
Debt woes and bankruptcy fears are likely to hurt SeaDrill's near-term business to a considerable extent. SeaDrill, being one of the worst sufferers of the industry’s downturn, has the maximum debt in the oil rig industry. The company has been contemplating restructuring measures under bankruptcy for quite some time now and cautioned shareholders for the second time of severe losses due to the same. The company restated that current common stockholders will have minimal recovery, suggesting that debt holders will get the majority of the equity holdings even if the restructuring takes place.
Our proven model does not conclusively show that SeaDrill will beat estimates this quarter. That is because 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. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at a loss of 5 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: SeaDrill currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
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