Hess Third Quarter Earnings Preview

By Investopedia Staff | October 26, 2012 AAA

On Wednesday, October 31, 2012, Hess (NYSE:HES) will announce its third quarter earnings. The consensus analyst estimate has dropped from $1.26 a share to the current estimate of earnings of $1.20 a share.

Earnings season is important to investors because it shows how much profit is left in the company's hand after deducting costs from revenue. SEE: 12 Things You Need To Know About Financial Statements

What to Expect: Analysts are expecting Hess to report earnings of $1.20 per share, up 8.1% from a year ago, when the company reported earnings of $1.11 per share.

The consensus estimate is down from three months ago when it was $1.23. Analysts are projecting earnings of $5.88 per share for the fiscal year.

Revenue is expected to exceed last year's figure of $8.76 billion by 4.8% and come in at $9.18 billion for the quarter. Revenue for the fiscal year is expected to come in at $37.45 billion.

Company Performance: The average revenue increase over the past four quarters is 0.2%. The biggest increase was in the third quarter of the last fiscal year, up 11.4% from the year-earlier quarter.

Compared to the industry average of 10.66, HES' P/E ratio of 14.2 is quite high. Generally speaking, the higher the P/E ratio, the higher the market expectations for a company's future performance. Perhaps one of the most widely-used stock analysis tools is the price-to-earnings ratio, or P/E. A high or low P/E ratio is not good or bad in and of itself, but a company trading with a high P/E ratio must continue to post strong financial performance or its stock price is likely to fall. SEE: Investment Valuation Ratios: Price/Earnings Ratio

The stock price has risen from $48.18 on July 30, 2012 to $53.90 over the past quarter. Hess' best recent streak was when its price gained $3.59 per share between September 5, 2012 and September 7, 2012.

The Competition: Hess is a global integrated energy company that explores and refines crude oil and natural gas. The majority of analysts (eight of 14) give Hess a buy rating. The rating has remained steady for the past three months.

The company's closest competitor in the oil and gas operations industry is China Petroleum & Chemical (SNP). Analysts are more optimistic about Hess than about China Petroleum & Chemical. Only two out of three analysts rate the latter a buy.

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