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Oil Refining Q2 Earnings to Watch on July 28: ALJ, MPC
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We are in the heart of the second-quarter earnings season, with 25.2% of the S&P 500 members having reported already (as of Jul 22). This week 189 S&P 500 members are coming up with results.
Snapshot of Q2 Earnings So Far
We now have second-quarter results from 126 S&P 500 members that combined account for 32.7% of the index’s total market capitalization. Total earnings for these companies are down 1.1% from the same period last year while revenues are up 2.6%. Coming to the beat ratio, 70.6% came up with positive earnings surprises and 55.6% beat revenue estimates as per the Earnings Trends report dated Jul 22.
How Energy Sector Performed
Expectedly, the ‘Energy’ sector has been a big drag on the aggregate growth picture. For the sector components on the S&P 500 index that have reported second-quarter results, total earnings are down 70.1% on 24.2% lower revenues.
But the Energy sector’s results are so far better than expected, with 60.0% of companies beating earnings estimates – though undoubtedly aided by low expectations.
Was Q2 Favorable for Refiners?
The second quarter saw crude advancing more than 26% sequentially − the best quarterly percentage gain in seven years. Throughout the quarter, oil price improved significantly from mid-February, when West Texas Intermediate (WTI) crude fell to a 12-year low mark of $26.05 per barrel. Moreover, last month, oil prices settled above the psychologically important $50 per barrel level for the first time in more than 10 months.
This news did not favor refiners as they have to buy raw crude to produce refined petroleum products like gasoline. With the rise in price, black gold has become costlier for refiners and has in turn led to higher input cost.
Let’s take a look at the expected earnings performance of two refining players that are scheduled to post second-quarter results on Jul 28.
Independent oil refiner and marketer Marathon Petroleum Corp. (MPC - Free Report) missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average negative surprise of 16.05%.
An earnings beat is uncertain for Marathon Petroleum 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 estimates. 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.
Alon USA Energy Inc. delivered an average negative surprise of 5.93% for the trailing four quarters. On top of that, our model does not indicate that the company is likely to beat on earnings this time around. This is because Alon USA is a Zacks Rank #4 stock and carries an Earnings ESP of 0.00%.
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Oil Refining Q2 Earnings to Watch on July 28: ALJ, MPC
We are in the heart of the second-quarter earnings season, with 25.2% of the S&P 500 members having reported already (as of Jul 22). This week 189 S&P 500 members are coming up with results.
Snapshot of Q2 Earnings So Far
We now have second-quarter results from 126 S&P 500 members that combined account for 32.7% of the index’s total market capitalization. Total earnings for these companies are down 1.1% from the same period last year while revenues are up 2.6%. Coming to the beat ratio, 70.6% came up with positive earnings surprises and 55.6% beat revenue estimates as per the Earnings Trends report dated Jul 22.
How Energy Sector Performed
Expectedly, the ‘Energy’ sector has been a big drag on the aggregate growth picture. For the sector components on the S&P 500 index that have reported second-quarter results, total earnings are down 70.1% on 24.2% lower revenues.
But the Energy sector’s results are so far better than expected, with 60.0% of companies beating earnings estimates – though undoubtedly aided by low expectations.
Was Q2 Favorable for Refiners?
The second quarter saw crude advancing more than 26% sequentially − the best quarterly percentage gain in seven years. Throughout the quarter, oil price improved significantly from mid-February, when West Texas Intermediate (WTI) crude fell to a 12-year low mark of $26.05 per barrel. Moreover, last month, oil prices settled above the psychologically important $50 per barrel level for the first time in more than 10 months.
This news did not favor refiners as they have to buy raw crude to produce refined petroleum products like gasoline. With the rise in price, black gold has become costlier for refiners and has in turn led to higher input cost.
Let’s take a look at the expected earnings performance of two refining players that are scheduled to post second-quarter results on Jul 28.
Independent oil refiner and marketer Marathon Petroleum Corp. (MPC - Free Report) missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average negative surprise of 16.05%.
An earnings beat is uncertain for Marathon Petroleum 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 estimates. 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.
For the quarter to be reported, Marathon Petroleum as an Earnings ESP of 0.00%, while it carries a Zacks Rank #5. (Read more: Marathon Petroleum: What's Likely in Q2 Earnings?)
MARATHON PETROL Price and EPS Surprise
MARATHON PETROL Price and EPS Surprise | MARATHON PETROL Quote
Alon USA Energy Inc. delivered an average negative surprise of 5.93% for the trailing four quarters. On top of that, our model does not indicate that the company is likely to beat on earnings this time around. This is because Alon USA is a Zacks Rank #4 stock and carries an Earnings ESP of 0.00%.
ALON USA ENERGY Price and EPS Surprise
ALON USA ENERGY Price and EPS Surprise | ALON USA ENERGY Quote
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>