Are LINN Energy Earnings Still In Trouble?

Are LINN Energy Earnings Still In Trouble?

LINN Energy will release its quarterly report on Thursday, and the oil and gas company has historically produced impressive growth from its properties across the western half of the U.S., accompanied by strong dividends. But lately, concerns have started to pile up, and LINN Energy earnings could come under pressure if some of the headwinds it has faced recently don't reverse soon.

LINN Energy technically isn't a master limited partnership, but it has many of the same traits as MLPs, including healthy dividend income and the need to report income on K-1 tax forms. The corporate entity LinnCo gives investors an indirect way of owning LINN Energy units without the tax challenges of holding LLC units directly. Either way, though, both investments rely on the success of LINN Energy's core business. Let's take an early look at what's been happening with LINN Energy over the past quarter and what we're likely to see in its quarterly report.

Stats on LINN Energy

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$584.87 million

Change From Year-Ago Revenue


Earnings Beats in Past Four Quarters


Source: Yahoo! Finance.

Which way are LINN Energy earnings headed this quarter?
Analysts have pushed down their views on LINN Energy earnings recently, with a minimal penny-per-share cut in June-quarter estimates giving way to a much more serious $0.26 per share drop in full-year 2013 predictions. The units have performed even worse, with a price drop of nearly 30% since early May.

LINN came into the quarter on an uncertain note, with first-quarter earnings having fallen short of expectations despite a 69% jump compared to the previous year. The company facing reduced activity in the Permian Basin, and with most of its properties falling outside the most lucrative energy plays in the nation, LINN hasn't inspired the same confidence that investors in other oil and gas producers have had.

Still, the big hope for LINN was that its deal to buy Berry Petroleum would go through. With LinnCo using its stock to acquire Berry, LINN Energy will then purchase former Berry assets from LinnCo in exchange for LINN units. The companies pushed the closing date into the third quarter from its original closing deadline of June 30, but now, there are concerns that the deal might not happen at all. With an early July announcement from the SEC that LINN Energy and LinnCo preserve documents related to the Berry acquisition, investors now worry that the regulator could prevent the deal from going forward.

Since the SEC announcement, though, several Wall Street professionals have come out in favor of LINN's future prospects. With analysts at a couple major brokerage firms as well as hedge-fund Omega Advisors founder Leon Cooperman coming out in support of LINN, unitholders have seen some relief from the worst of LINN's price declines.

In the LINN Energy earnings report, watch for the company to give guidance on how the SEC investigation is going. If anything forces LINN and Berry to break off negotiations, then it could have further negative consequences on LINN unit prices.

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