The first-quarter earnings season is almost over with just around 10% of the S&P 500 members left to report their results.
Q1 Report Card
We now have Q1 results from 446 S&P 500 members that combined account for 91.9% of the index’s total market capitalization. According to our latest Earnings Outlook report, total earnings for these companies are up 14% from the same period last year on 7.9% higher revenues, with 72.4% delivering positive earnings surprises and 66.4% beating revenue estimates.
Taking into account the remaining 54 index members whose results are still to come, overall S&P 500 earnings are expected to be up 12.7% on 6.2% higher revenues, with positive growth for 14 of the 16 Zacks sectors barring Transportation and Auto.
Energy Earnings Soar
The ‘Energy’ sector – whose year-earlier comparison was to an aggregate loss – stood out as one of the best performers of the Q1 earnings season. With all sector components on the S&P 500 index having reported results, total earnings had very strong year-over-year dollar growth on 33.8% higher revenues. While 69.7% of the companies have been successful in beating earnings estimates, 63.6% of them have outperformed the topline.
Among major industry players, integrated bellwethers like Chevron Corp. (CVX - Free Report) , BP plc (BP - Free Report) and ExxonMobil Corp. (XOM - Free Report) registered impressive earnings beats of 65.88%, 21.05% and 11.76%, respectively, amid the recovery in commodity prices and success of their cost savings initiatives.
Even oilfield services behemoth Halliburton Co. (HAL - Free Report) and refining giant Valero Energy Corp.’s (VLO - Free Report) quarterly results followed the same upward trajectory of their peers, surpassing expectations comfortably.
How to Identify the Outperformers?
Though all energy firms within the S&P 500 group have already come up with quarter earnings reports, there are certain other companies that are yet to release March numbers. The sector’s impressive Q1 picture suggests that some of them might have the potential to beat earnings in their upcoming releases.
Investing in such companies can fetch handsome returns for investors. This is because a stock generally surges upon 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.
You could further narrow down the list of choices by looking at stocks that have a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
2 Stocks to Invest In
Gulfmark Offshore Inc. : Headquartered in Houston, TX, Gulfmark Offshore provides a broad range of marine transportation services – through its modern fleet of offshore support vessels – to oil and gas explorers.
Zacks Rank #3
Earnings ESP: +15.19%
Expected Earnings Release Date: May 15
Enduro Royalty Trust : Formed in May 2011, Austin, TX-based Enduro Royalty Trust owns net profits interest from the sale of oil and natural gas production in the Permian Basin in West Texas and East Texas/North Louisiana regions.
Zacks Rank #3
Earnings ESP: +75.00%
Expected Earnings Release Date: May 18
Riding on the recovery in 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.
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