Major energy players are gearing up to report Q4 results, with Kinder Morgan, Inc. (KMI) having released the numbers on Jan 16. The sector is expected to report year-over-year earnings growth of 68.3% on 14.6% revenue growth.
Before delving into details on stocks that are poised to trump estimates, let’s quickly discuss the crude and natural gas pricing scenario of Q4.
How Oil & Gas Fared in Q4
In fourth-quarter 2018, the West Texas Intermediate (WTI) crude plunged from a multi-year high of $76.40 a barrel in early October to below $45 in late December, per the U.S. Energy Information Administration (EIA).
Soft demand outlook on fears of global economic slowdown kept energy stocks under pressure. Notably, the enforcement of sanctions against Iran — one of the leading oil producers in the world — by the United States last November could not keep oil price from plunging. This was because Washington issued sanction waivers to several countries to continue importing oil from Iran, till mid-2019.
Despite the free fall, the average WTI oil prices for October and November of 2018 were recorded at $70.75 and $56.96 per barrel, higher than $51.58 and $56.64 for the respective months of 2017, EIA added. However, the average crude price for December 2018 declined year over year.
Per EIA, the average natural prices for the months of October, November and December of 2018 were reported at $3.28 per Million Btu, $4.09 per Million Btu and $4.04 per Million Btu, higher than $2.88, $3.01 and $2.82 for the respective months of 2017.
What Awaits the Energy Players?
Although plummeting crude prices during the October-to-December quarter of 2018 should have hurt upstream businesses, a year-over-year uptick in prices in the initial two months may have helped explorers and producers.
It is to be noted that the largest oilfield service firm Schlumberger Limited (SLB - Free Report) expects demand and pricing for North American oilfield services to have been weak in the October-to-December quarter, as the pipeline bottleneck problem in the prolific Permian Basin and declining well productivity are likely to have hurt crude production volumes.
The free fall in oil price, however, was a boon for refiners as it brought down input prices for them.
It is to be noted that the commodity pricing environment was favorable for the explorers and producers of natural gas.
Potential Winners in the Energy Space
Given the commodity price backdrop of Q4, it is not easy to pick stocks with the potential to trump Q4 earnings estimates. Here, the Zacks methodology comes in handy as it helps identify stocks that not only boast solid fundamentals but are also poised to beat estimates this earnings season.
Our research shows that stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have a higher chance — as high as 70% — of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Headquartered in Denver, CO, Antero Resources Corporation (AR - Free Report) is a leading explorer and producer of oil and natural gas.
With a Zacks Rank #3 and an Earnings ESP of +4.19%, Antero Resources looks set for a positive earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.
Antero Resources is set to announce fourth-quarter results on Feb 13.
BP plc (BP - Free Report) , headquartered in London, is a leading integrated energy company.
With a Zacks Rank #3 and an Earnings ESP of +8.15%, BP looks positioned for a positive earnings surprise.
BP is scheduled to report fourth-quarter results on Feb 5.
Based in Frisco, TX, Comstock Resources, Inc. (CRK - Free Report) is a major upstream energy firm.
The company carries a Zacks Rank #3 and has an Earnings ESP of +17.86%, that suggests a beat in the to-be-reported quarter. The company is slated to release fourth-quarter results on Feb 21.
QEP Resources, Inc. (QEP - Free Report) , headquartered in Denver, CO, is also a leading upstream energy player.
With a Zacks Rank #3 and an Earnings ESP of +27.96%, QEP Resources is on course to report a positive earnings surprise.
The company is expected to release fourth-quarter results on Feb 27.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>