We are almost at the end of the Q3 earnings season with only a few S&P 500 companies left to report to their quarterly financial results.
Picture Emerging Thus Far
So far, 423 S&P 500 members – 87.1% of the index’s total market capitalization – have unveiled their Q3 numbers. Total earnings for these companies have inched up 3.6% on 2.4% higher revenues, on a year-over-year basis. Our Earnings Preview report dated Nov 4, 2016, indicates that 72.8% of these companies delivered positive earnings surprises, while 55.1% beat revenue estimates. With 31 S&P 500 members set to release their quarterly results this week the overall earnings picture will become clearer.
Will the Energy Sector Remain a Drag on Earnings?
The ‘Oils/Energy’ sector remains weak and continues to be a drag on overall growth. The results of the 94.4% sector components on the S&P 500 Index that have reported Q3 results – including behemoths like Exxon Mobil Corp. (XOM - Free Report) and Chevron Corp. (CVX - Free Report) – indicate that total earnings plunged 63.3% due to a 12.8% decline in revenues, on a year-over-year basis.
Though the Oils/Energy sector is one of the most underperforming, an overwhelming 73.5% companies from this space managed to deliver an earnings beat, albeit due to very low estimates.
Q3 Oil & Natural Gas Pricing
The pricing scenario for natural gas was much better in Q3, both on a sequential and an annualized basis. However, oil prices were weaker than the July-September quarter of 2016. Despite the persistent weakness in crude, the commodity price recovered significantly from the mid-February lows. The improvement in commodity prices is undoubtedly favorable for upstream energy players as these firms would now be able to continue exploration and production activities by hiring more drillers.
This is evidenced by the substantial increase in the U.S. rig count in recent times as indicated by Baker Hughes Inc.’s (BHI - Free Report) – the company’s data issued since 1944 is as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry – rig count for Sep 2016. In the U.S., the total number of rigs increased from the Aug 2016 count owing to a rise in the number of land rigs.
Developments in this front should be favorable for upstream energy players in terms of improved production and prices.
Midstream players involved in storage of crude oil are also expected to be benefited as the oversupplied commodity market may call for more storage and transportation activities.
Stocks to Watch for Earnings on Nov 10
Let’s see what’s in store for these two oil companies that are expected to come up with Q3 numbers on Nov 10.
Calgary, Canada-based Crescent Point Energy Corp. (CPG - Free Report) is involved in activities like exploration, development and production of crude oil and natural gas in the U.S and Western Canada.
Our proven model does not show that Crescent Point Energy is likely to beat on earnings. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to deliver an earnings beat. Crescent Point Energy has Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
World Point Terminals LP (WPT - Free Report) is engaged in activities like operations and development of terminals and other assets for the storage of crude oil and refined petroleum products. Our proven model does not conclusively show that World Point Terminals is likely to beat on earnings because this Zacks Rank #3 stock has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
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