Back to top

Image: Bigstock

Peek Into Oil Q2 Earnings on Jul 24: HAL, APC & CLB

Read MoreHide Full Article

We are entering the heart of the Q2 earnings season, with a host of S&P 500 members expected to come out with results by the end of next week.

Picture Emerging Thus Far

We now have Q2 results from 54 S&P 500 members that combined account for 16.9% of the index’s total market capitalization. According to the latest Earnings Trends, total earnings for these companies are up 11.9% from the same period last year on 5.5% higher revenues, with 79.6% positive earnings surprises and 72.2% beating revenue estimates.

At this stage, we don’t have any results from the ‘Energy’ sector. However, quite a few companies have earnings lined up pretty soon, and events are shaping up quite nicely for their report.

Energy: First Half Recap

Last year, 'Energy' was the strongest S&P sector performer, with a market-thumping 24% return. In particular, November's historic OPEC-led production cut deal to alleviate a supply glut managed to buoy oil prices and stabilize them around the psychologically important $50 per barrel threshold. The commodity was on a stellar run on optimism surrounding the agreement, and the outlook for oil stocks was getting better.

The seemingly positive developments encouraged investors to bet on firming prices for 2017 with the oil industry finally hoping that 'this would be the year.' True to the strong sentiments, U.S. oil prices reached around $55 per barrel in late February, the highest level in 19 months.

However, the situation is drastically different now, with the commodity having floundered in recent weeks. By June 21, crude had cratered more than 20% from its February highs and officially plunged into bear territory. In fact, prices ended down 14.3% for the first half of the year – the worst performance since 1998.

Let's take a look at how oil and gas prices behaved during the second quarter of this year.

Strong Q2 Earnings Growth Prediction

A look back at the Q1 earnings season reflects that the overall results of the Oil/Energy sector were spectacular, driving the aggregate growth picture for the S&P 500 index.

The Jan-Mar 2017 period turned out to be a rather good one with both oil and natural gas prices benefitting from easier comparison figures from the year-ago period. While crude slumped to some 12-year low in the first quarter of 2016, natural gas futures dropped to its worst level in almost 17 years.

As a result, the sector – whose year-earlier comparison was to an aggregate loss – came out swinging. For the sector components on the S&P 500 index, total Q1 earnings had very strong year-over-year dollar growth on 33.8% higher revenues. While 69.7% of the companies were successful in beating earnings estimates, 63.6% of them outperformed the topline.

The picture looks rather encouraging for the upcoming Q2 earnings season as well. This is not surprising, considering that oil and gas are both averaging higher compared to the second quarter of 2016 when the energy companies reported unusually low bottom-line. While earnings for the Oil/Energy sector are set to jump a massive 276.2% – the highest year-over-year growth among all sectors – the top-line is likely to show a growth of 14.1% from the second quarter 2016 levels.

Stocks to Watch for Earnings on Jul 24

Let’s see what’s in store for three energy companies expected to come up with second-quarter numbers on Monday, Jul 24.

One of the largest oilfield service providers in the world, Halliburton Co. (HAL - Free Report) is expected to report before the opening bell. 

In the first quarter of 2017, this Houston, TX-headquartered provider of equipment, maintenance, and engineering and construction services beat estimates handily, thanks to improved utilization on the back of growing North American rig count.

Coming to earnings surprise history, the company has an excellent record: it’s been ahead of estimates in each of the last four quarters. And our model indicates that Halliburton is likely to beat on earnings this time around too.

This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) 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, Halliburton – with an Earnings ESP of +15.79% and Zacks Rank #3 – is powered with the right combination of these two key ingredients. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, 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.

Halliburton Company Price and EPS Surprise

 

Halliburton Company Price and EPS Surprise | Halliburton Company Quote

Headquartered in The Woodlands, TX, Anadarko Petroleum Corp. is another energy company set to report second-quarter 2017 results – this time after market closing. The company – which is one of the largest independent oil and natural gas exploration and production (E&P) companies of the world – has a bad track of having underperformed estimates in three of the last four quarters.

Unfortunately, Anadarko is unlikely to break the trend in the to-be-reported quarter. This is because the company is a Zacks Rank #4 stock that has an Earnings ESP of -6.67%. (Read more: Will Anadarko Petroleum Miss Earnings Estimates in Q2?)

Lastly, there is specialized service provider Core Laboratories N.V. (CLB - Free Report) coming out with Apr-Jun operational results after the closing bell. The company provides reservoir management and production enhancement services to the global oil and gas industry.

As far as earnings surprises are concerned, the company has a modest record, having managed to beat the Zacks Consensus Estimate just once in the last four reports.

Our model does not indicate that Core Labs is likely to beat on earnings this time around too, as it has a Zacks Rank #5 and an Earnings ESP of 0.00%.

Core Laboratories N.V. Price and EPS Surprise

 

Core Laboratories N.V. Price and EPS Surprise | Core Laboratories N.V. Quote

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Halliburton Company (HAL) - free report >>

Core Laboratories Inc. (CLB) - free report >>