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Energy Stocks to Watch for Earnings on Feb 6: TSO & DO
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We are in the thick of the Q4 earnings season, with results on board from 219 S&P 500 members that combined account for almost 59% of the index’s total market capitalization. According to the latest Earnings Outlook, overall earnings for these companies are up 5.4% from the same period last year on 3.5% higher revenues, with 64.8% positive earnings surprises and 53.4% beating revenue estimates.
Energy: Finally, on the Growth Path
Following eight back-to-back quarters of earnings decline, analysts said that the sector was likely to get better in the fourth quarter and clock its first positive earnings growth after years. With estimate revisions going up following OPEC’s Algeria grandstand, the Oil/Energy sector’s earnings were expected to improve 8.8% from the fourth quarter 2015 levels.
True to the predictions, the sector has come out swinging. For the 65.1% sector components on the S&P 500 index that have reported Q4 results, total earnings are up 12.2% on 2.8% higher revenues. While 58.3% of the companies have been successful in beating earnings estimates, 75% have outperformed the top line.
Let's take a look at how oil and gas prices behaved during the fourth quarter.
Q4: Rebounding Oil & Natural Gas Prices
The OPEC deal and extreme weather conditions engineered a hefty rise in oil and gas prices during the fourth quarter.
A historic OPEC production cut agreement, together with help from non-OPEC producers saw oil prices end the year at $53.72 a barrel - representing a gain of 11.4% sequentially and 45% for the year.
Meanwhile, natural gas embarked on its own upward journey, with futures jumping around 25% just in the fourth quarter. Ending the year at $3.724 per million Btu (MMBtu) – up 59% from 2015 – the heating fuel was buoyed by a cold snap that translated into strong demand.
Stocks to Watch for Earnings on Feb 6
Let’s see what’s in store for two energy companies expected to come up with fourth-quarter numbers on Monday, Feb 6. Let’s take a look at how things are shaping up at their end.
An independent refiner and marketer of refined petroleum products in the western U.S., Tesoro Corp. is expected to report fourth-quarter 2016 results after the closing bell.
In the third quarter of 2016, this San Antonio, TX-headquartered downstream operator managed to beat estimates on significant contribution from the logistics segment.
Coming to earnings surprise history, the company has a good record: its beaten estimates in 3 of the last four quarters, resulting in an average positive surprise of 24.90%.
However, an earnings beat looks uncertain for Tesoro this time around. This is because, as per our proven model, a stock needs to have both a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP to beat earnings. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Simultaneously, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
We also have Houston, TX-based Diamond Offshore Drilling Inc. (DO - Free Report) coming out with fourth-quarter 2016 results Monday – this time before the market opens. Coming to earnings surprise history, the company – which is a major contract driller, providing comprehensive offshore drilling services to the global energy industry – has an excellent track of having outperformed estimates in each of the last four quarters.
But with an Earnings ESP of -16.67% and Zacks Rank #3, our proven model shows that an earnings beat is not guaranteed for Diamond Offshore in the to-be-reported quarter. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.
Diamond Offshore Drilling, Inc. Price and EPS Surprise
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Energy Stocks to Watch for Earnings on Feb 6: TSO & DO
We are in the thick of the Q4 earnings season, with results on board from 219 S&P 500 members that combined account for almost 59% of the index’s total market capitalization. According to the latest Earnings Outlook, overall earnings for these companies are up 5.4% from the same period last year on 3.5% higher revenues, with 64.8% positive earnings surprises and 53.4% beating revenue estimates.
Energy: Finally, on the Growth Path
Following eight back-to-back quarters of earnings decline, analysts said that the sector was likely to get better in the fourth quarter and clock its first positive earnings growth after years. With estimate revisions going up following OPEC’s Algeria grandstand, the Oil/Energy sector’s earnings were expected to improve 8.8% from the fourth quarter 2015 levels.
True to the predictions, the sector has come out swinging. For the 65.1% sector components on the S&P 500 index that have reported Q4 results, total earnings are up 12.2% on 2.8% higher revenues. While 58.3% of the companies have been successful in beating earnings estimates, 75% have outperformed the top line.
The Oil/Energy sector’s positive growth largely reflects better-than-expected quarterly profit from bellwether ExxonMobil Corp. (XOM - Free Report) , which more than offset smaller rival Chevron Corp.’s (CVX - Free Report) disappointing Q4 numbers.
Let's take a look at how oil and gas prices behaved during the fourth quarter.
Q4: Rebounding Oil & Natural Gas Prices
The OPEC deal and extreme weather conditions engineered a hefty rise in oil and gas prices during the fourth quarter.
A historic OPEC production cut agreement, together with help from non-OPEC producers saw oil prices end the year at $53.72 a barrel - representing a gain of 11.4% sequentially and 45% for the year.
Meanwhile, natural gas embarked on its own upward journey, with futures jumping around 25% just in the fourth quarter. Ending the year at $3.724 per million Btu (MMBtu) – up 59% from 2015 – the heating fuel was buoyed by a cold snap that translated into strong demand.
Stocks to Watch for Earnings on Feb 6
Let’s see what’s in store for two energy companies expected to come up with fourth-quarter numbers on Monday, Feb 6. Let’s take a look at how things are shaping up at their end.
An independent refiner and marketer of refined petroleum products in the western U.S., Tesoro Corp. is expected to report fourth-quarter 2016 results after the closing bell.
In the third quarter of 2016, this San Antonio, TX-headquartered downstream operator managed to beat estimates on significant contribution from the logistics segment.
Coming to earnings surprise history, the company has a good record: its beaten estimates in 3 of the last four quarters, resulting in an average positive surprise of 24.90%.
However, an earnings beat looks uncertain for Tesoro this time around. This is because, as per our proven model, a stock needs to have both a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP to beat earnings. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
For the quarter to be reported, Tesoro has an Earnings ESP of 0.00%, while it carries a Zacks Rank #3. (Read more: What's in Store for Tesoro Corp this Earnings Season?)
Simultaneously, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Tesoro Corporation Price and EPS Surprise
Tesoro Corporation Price and EPS Surprise | Tesoro Corporation Quote
We also have Houston, TX-based Diamond Offshore Drilling Inc. (DO - Free Report) coming out with fourth-quarter 2016 results Monday – this time before the market opens. Coming to earnings surprise history, the company – which is a major contract driller, providing comprehensive offshore drilling services to the global energy industry – has an excellent track of having outperformed estimates in each of the last four quarters.
But with an Earnings ESP of -16.67% and Zacks Rank #3, our proven model shows that an earnings beat is not guaranteed for Diamond Offshore in the to-be-reported quarter. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.
Diamond Offshore Drilling, Inc. Price and EPS Surprise
Diamond Offshore Drilling, Inc. Price and EPS Surprise | Diamond Offshore Drilling, Inc. Quote
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>