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Get Positive Earnings Surprises with These 5 Energy Stocks
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As is the norm, the oil services companies – providers of technical products and services to drillers of oil and gas wells – have kicked off what is expected to be a relatively good earnings season for U.S. energy firms.
Does this indicate that the 2½-year oil market downturn is finally close to an end, or is it just a blip before the pessimistic trend in energy sector earnings return?
Q4: Rebounding Oil & Natural Gas Prices
The OPEC deal and extreme weather conditions engineered a hefty rise in oil and gas prices during the fourth quarter.
A historic OPEC production cut agreement, together with help from non-OPEC producers saw oil prices end the year at $53.72 a barrel - representing a gain of 11.4% sequentially and 45% for the year.
Meanwhile, natural gas embarked on its own upward journey, with futures jumping around 25% just in the fourth quarter. Ending the year at $3.724 per million Btu (MMBtu) – up 59% from 2015 – the heating fuel was buoyed by a cold snap that translated into strong demand.
Higher Prices Leads to Bullish Expectations for Q4
As of now, the ‘Energy’ sector has been a big drag on the aggregate growth picture. According to our latest Earnings Trends report, for the few sector components on the S&P 500 index that have reported Q4 results, total earnings are down 67.2% on 14.3% lower revenues.
However, things are likely to get better with the segment eventually expected to clock its first positive earnings growth after 8 quarters of declines. With estimate revisions going up following OPEC’s Algeria grandstand, the Oil/Energy sector’s earnings are expected to improve 7.3% from the fourth quarter 2015 levels.
How to Identify the Outperformers?
The encouraging figures suggest that there are a number of companies likely to beat our fourth quarter earnings estimates.
Investing in such companies can fetch handsome returns for investors. This is because a stock generally surges upon an earnings beat.
But with a wide range of energy firms thronging the investment space, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver better-than-expected earnings.
While it is impossible to be sure about such outperformers, our proprietary methodology - Earnings ESP - makes it relatively simple. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Noble Midstream Partners L.P. : Houston, TX-based Noble Midstream Partners is an energy partnership that owns, operates and develops midstream infrastructure assets the DJ Basin in Colorado and the Delaware Basin in Texas.
Anadarko Petroleum Corp. : Headquartered in Woodlands, TX, Anadarko Petroleum is one of the largest independent oil and natural gas exploration and production companies of the world.
Matador Resources Co. (MTDR - Free Report) : With its headquarters in Dallas, TX, Matador Resources is an independent exploration and production company with oil and gas holdings in the Delaware Basin of New Mexico, the Texas southern Permian and Eagle Ford shale, and Louisiana's Haynesville and Cotton Valley plays.
Plains All American Pipeline L.P. (PAA - Free Report) : Houston, TX-based Plains All American Pipeline, a master limited partnership, is involved in the transportation, storage, terminalling and marketing of crude oil, natural gas, natural gas liquids and refined products in the U.S. and Canada.
EQT Corp. (EQT - Free Report) : Based in Pittsburgh, PA, EQT Corporation (EQT - Free Report) is an energy company that focuses on natural gas supply activities in the Appalachian area, including production and gathering, natural gas distribution and transmission as well as energy efficiency solutions.
Riding on the sharp rise in fourth quarter oil and gas prices, there are certain energy companies that are primed to outperform the Zacks Consensus Estimate. They certainly hold the potential to make investors standout gains.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>
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Get Positive Earnings Surprises with These 5 Energy Stocks
As is the norm, the oil services companies – providers of technical products and services to drillers of oil and gas wells – have kicked off what is expected to be a relatively good earnings season for U.S. energy firms.
If oilfield services behemoth Halliburton Company’s (HAL) numbers are anything to go by, this should be a quarter worth watching. The company came out with better-than-expected Q4 profit on continued cost management actions and improving North American activity. However, larger rival Schlumberger Ltd. (SLB - Free Report) failed to impress with its Q4 result.
Does this indicate that the 2½-year oil market downturn is finally close to an end, or is it just a blip before the pessimistic trend in energy sector earnings return?
Q4: Rebounding Oil & Natural Gas Prices
The OPEC deal and extreme weather conditions engineered a hefty rise in oil and gas prices during the fourth quarter.
A historic OPEC production cut agreement, together with help from non-OPEC producers saw oil prices end the year at $53.72 a barrel - representing a gain of 11.4% sequentially and 45% for the year.
Meanwhile, natural gas embarked on its own upward journey, with futures jumping around 25% just in the fourth quarter. Ending the year at $3.724 per million Btu (MMBtu) – up 59% from 2015 – the heating fuel was buoyed by a cold snap that translated into strong demand.
Higher Prices Leads to Bullish Expectations for Q4
As of now, the ‘Energy’ sector has been a big drag on the aggregate growth picture. According to our latest Earnings Trends report, for the few sector components on the S&P 500 index that have reported Q4 results, total earnings are down 67.2% on 14.3% lower revenues.
However, things are likely to get better with the segment eventually expected to clock its first positive earnings growth after 8 quarters of declines. With estimate revisions going up following OPEC’s Algeria grandstand, the Oil/Energy sector’s earnings are expected to improve 7.3% from the fourth quarter 2015 levels.
How to Identify the Outperformers?
The encouraging figures suggest that there are a number of companies likely to beat our fourth quarter earnings estimates.
Investing in such companies can fetch handsome returns for investors. This is because a stock generally surges upon an earnings beat.
But with a wide range of energy firms thronging the investment space, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver better-than-expected earnings.
While it is impossible to be sure about such outperformers, our proprietary methodology - Earnings ESP - makes it relatively simple. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
5 Stocks to Invest In
With the help of the Zacks Stock Screener we have zeroed-in on five energy stocks that sport a Zacks Rank #1 (Strong Buy) or 2 (Buy) and flaunt a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Noble Midstream Partners L.P. : Houston, TX-based Noble Midstream Partners is an energy partnership that owns, operates and develops midstream infrastructure assets the DJ Basin in Colorado and the Delaware Basin in Texas.
Zacks Rank #1
Earnings ESP: +19.18%
Expected Earnings Release Date: Feb 1
Anadarko Petroleum Corp. : Headquartered in Woodlands, TX, Anadarko Petroleum is one of the largest independent oil and natural gas exploration and production companies of the world.
Zacks Rank #2
Earnings ESP: +7.84%
Expected Earnings Release Date: Jan 31
Matador Resources Co. (MTDR - Free Report) : With its headquarters in Dallas, TX, Matador Resources is an independent exploration and production company with oil and gas holdings in the Delaware Basin of New Mexico, the Texas southern Permian and Eagle Ford shale, and Louisiana's Haynesville and Cotton Valley plays.
Zacks Rank #2
Earnings ESP: +50.00%
Expected Earnings Release Date: Feb 22
Plains All American Pipeline L.P. (PAA - Free Report) : Houston, TX-based Plains All American Pipeline, a master limited partnership, is involved in the transportation, storage, terminalling and marketing of crude oil, natural gas, natural gas liquids and refined products in the U.S. and Canada.
Zacks Rank #2
Earnings ESP: +26.53%
Expected Earnings Release Date: Feb 7
EQT Corp. (EQT - Free Report) : Based in Pittsburgh, PA, EQT Corporation (EQT - Free Report) is an energy company that focuses on natural gas supply activities in the Appalachian area, including production and gathering, natural gas distribution and transmission as well as energy efficiency solutions.
Zacks Rank #2
Earnings ESP: +22.22%
Expected Earnings Release Date: Feb 2
Bottom Line
Riding on the sharp rise in fourth quarter oil and gas prices, there are certain energy companies that are primed to outperform the Zacks Consensus Estimate. They certainly hold the potential to make investors standout gains.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>