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Bear of the Day: Statoil (STO)

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One area of the market that has been in trouble despite an overall surge in asset prices is the oil sector. This corner of the market has experienced underperformance relative to broad benchmarks, and there is little prospect for a turnaround in the weeks ahead either.

That is because, no matter what good news hits the oil market, prices for crude seem to have trouble breaking out higher. Supply issues remain at the forefront of investors’ minds, and there aren’t really any big demand catalysts on the horizon either. No wonder the energy sector currently has the worst sector rank right now, and why it has been in the doldrums for weeks.

Where to Avoid in Particular

While there are still some pockets of opportunity in this bleak environment, investors should take special care when considering the oil sector. In particular, the foreign market in the integrated space is weak these days, with a bottom 30% industry rank.

One that should definitely be on your radar in this space is Statoil (STO), the Norwegian oil giant that is majority owned by the government of Norway. This company has seen its shares struggle in recent trading, but the worst may still be ahead if we look to recent earnings estimate revisions by analysts covering Statoil.

Recent Estimates & Earnings

We have not seen any estimates go higher for the full year earnings picture in the past two months, and have instead seen the consensus estimate fall by roughly 9.3% in the time frame. We have also seen a sluggish trend for the following year where no estimates moved higher again.

The worst part about this is that the most recent estimates have been even lower than the consensus. The most accurate estimate for the current quarter is just 75 cents per share, a nearly 15% fall from the current consensus of 88 cents per share, or a nearly 23% cut from the consensus two months ago.

If that wasn’t enough, Statoil also has a horrific track record in earnings season. Sure, the company beat in its most recent report, but before that it saw three reports in a row that missed by over 100%, including three quarters that saw a loss when investors were expecting a profit.

Statoil ASA Price, Consensus and EPS Surprise

Statoil ASA Price, Consensus and EPS Surprise | Statoil ASA Quote

With figures like this and a weak outlook for energy in general, it shouldn’t be a surprise that this stock has recently fallen into Zacks Rank #5 (Strong Sell) territory, and that we are looking for more underperformance from this company in the future.

Other Choices

If you are looking beyond Statoil but still want to be in the energy market, your options are limited. Still, there might be a few choices in the Canadian E&P market, as this has a top 45% industry rank right now. One promising name in this group is Canadian Natural Resources Limited ((CNQ - Free Report) ) which currently has solid fundamentals.

The company not only has a VGM Score of ‘B’, but it currently has a Zacks Rank #1 (Strong Buy), so earnings estimates have been trending in the right direction too. Add that in to a decent history in the last few earnings reports, and this becomes a far better potential choice for investors in the oil industry than the weakness that is found in Statoil these days.

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