Canadian energy explorer Encana Corporation (ECA) is set to release fourth-quarter 2014 financial results before the opening bell on Feb 25, 2015.

Last quarter, the exploration and production (E&P) player delivered a negative earnings surprise of 24.00%. Moreover, over the last four quarters, the company’s average negative surprise was 14.71%. Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

Encana is a focused pure-play natural gas E&P company and generates earnings after selling the commodity.

For the fourth-quarter 2014, the company hedged natural gas price at $4.17 per thousand cubic feet (Mcf), lower than the year-ago comparable period hedge price of $4.37 per Mcf. The October to December 2014 natural gas hedge price was also much below the commodity’s marginal cost of production − usually $4.9–$5.9 per Mcf − in North America.

Overall, we don’t find the operating environment conducive to an earnings beat by the company.

Earnings Whispers?

Our proven model does not conclusively show that Encana is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This leads to an ESP of -9.52% for Encana as the Most Accurate estimate stands at 19 cents while the Zacks Consensus Estimate is pegged higher at 21 cents.

Zacks Rank: Encana has a Zacks Rank #4 (Sell). As it is, we caution investors against Sell-rated (Zacks Rank #4 or 5) stocks going into an earnings announcement; Encana’s negative Earnings ESP complicates our prediction even further.

Stocks to Consider

Here are some companies in the energy sector to consider as these have the right combination of elements to post an earnings beat this quarter.

Global Partners LP (GLP) with an Earnings ESP of +75.00% and a Zacks Rank #2 (Buy). The partnership is expected to release earnings on Mar 12.

Western Refining, Inc. (WNR) with an Earnings ESP of +4.81% and a Zacks Rank #3 (Hold). The company is expected to release earnings on Feb 26.

Ferrellgas Partners LP (FGP) with an Earnings ESP of +1.82% and a Zacks Rank #3. The partnership is slated to release earnings on Mar 9.

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