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Top 5 Oil Stocks Set to Beat on Q4 Earnings Next Week

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The fourth-quarter 2020 earnings results have given a pleasant surprise to market participants.   In contrast to the initial expectations of the fourth consecutive negative earnings quarter for the broad-market S&P 500 Index, the last quarter of 2020 has turned out as positive so far. Projections for fourth-quarter earnings for the S&P 500 as a whole have also become positive.

Meanwhile, in line with the ensuing fourth-quarter trends, five oil stocks with a favorable Zacks Rank are set to beat on earnings next week. Investment in these stocks should provide good returns to investors going forward.

Oil Sector in Q4

The outbreak of the deadly coronavirus has caused massive global crude oil demand destruction since early 2020. In fact, the oil and energy sector was one of the hardest hit area ofs the global economy.  

Global oil demand dropped dramatically due to lockdowns imposed by almost all countries. Demand plunged owing to shrinking volume of global trade, ban in air travel and public transportation for a large part of 2020, and shutdown of most of the industries. Moreover, oversupply of crude oil globally resulted in an oil price crush. The adverse situation kept upstream operations and investment in check.

However, the situation changed slowly in the last quarter of 2020. People gradually returned to their workplace as the U.S. economy reopened systematically. Moreover, the FDA approved two COVID-19 vaccines and Congress cleared the path of a $900 billion of fresh fiscal stimulus to be injected in the economy.

These positive developments have strengthened business confidence in both upstream and downstream oil producers. Consequently, the Energy Select Sector SPDR (XLE) rallied 28.3% in fourth-quarter 2020.

Our Top Picks

We have narrowed down our search to five oil stocks slated to release fourth-quarter earnings results next week. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after the earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The chart below shows the price performance of our five picks in the last quarter.

 

Diamondback Energy Inc. (FANG - Free Report) is an independent oil and natural gas company focusing on the acquisition, development, exploration and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas. The Zacks Rank #2 company has an Earnings ESP of +8.58%.

Diamondback Energy has an expected earnings growth rate of 78% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 26% over the last 30 days. It has a trailing four-quarter earnings surprise of 121.2%, on average. The company is set to release earnings results on Feb 22, before the opening bell.

Magnolia Oil & Gas Corp. (MGY - Free Report) is engaged in the acquisition, development, exploration and production of oil, natural gas, and natural gas liquids reserves in the United States. The Zacks Rank #2 company has an Earnings ESP of +24.14%.

Magnolia Oil & Gas has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.1% over the last 30 days. The company is set to release earnings results on Feb 23, before the opening bell.

Matador Resources Co. (MTDR - Free Report) is engaged in the exploration, development, production, and acquisition of oil and natural gas resources in the United States. It operates in two segments, Exploration and Production and Midstream. The Zacks Rank #1 company has an Earnings ESP of +19.90%.

Matador Resources has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 26.2% over the last 30 days. The company is set to release earnings results on Feb 23, after the closing bell.

PDC Energy Inc. (PDCE - Free Report) is an independent exploration and production company, acquires, explores, develops and produces crude oil, natural gas, and natural gas liquids in the United States. The Zacks Rank #1 company has an Earnings ESP of +10.77%.

PDC Energy has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 19.6% over the last 30 days. The company is set to release earnings results on Feb 24, after the closing bell.

EOG Resources Inc. (EOG - Free Report) explores, develops, produces and markets crude oil, and natural gas and natural gas liquids. The Zacks Rank #2 company has an Earnings ESP of +4.83%. EOG Resources is set to release earnings results on Feb 25, after the closing bell.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 41.8% over the last 30 days. It has a trailing four-quarter earnings surprise of 24.1%, on average.

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