In their weekly Bespoke Report, the Bespoke research team takes readers through market, economic, sentiment and technical data from the last week.
Last night, while reviewing Thomson Reuter’s quarterly earnings data for Q1 ’15 and through Q1 ’16, here is how expected Energy earnings growth rates have tracked according to the This Week in Earnings Report:
(The first column (percentage) is the expected growth rate as of May 22, 2015, while the 2nd column in the expected growth rate as of April 1, ’15):
Q1 ’16: +20.2%, +46.3%
Q4 ’15: -39.4%, -36.9%
Q3 ’15: -58.7%, -58.6%
Q2 ’15: -63.6%, -64.6%
Q1 ’15: -57.9%, -63.7%
Per the weekly Thomson Reuters data, with 41 of 41 energy companies having reported their Q1 ’15 earnings, you can see how the energy expected earnings growth rates have stabilized over the last 7 weeks.
That may not seem like much for readers, but for the first stretch since last September, the forward quarter’s energy earnings rates are getting “less negative.”
Here are some fundamental points noted in Bespoke’s weekly Bespoke Report dated May 22 (regarding oil and energy)
- Crude oil is up 4.94% in 2015 YTD
- Crude oil inventories have now fallen 3 straight weeks
- This week’s crude oil inventory decline was 2.674 million barrels versus the expected 1.75 million barrels
- Crude inventories are still 139 million barrels above their historical average dating back to 1983
- Bespoke is bullish on crude (the commodity) “in the near to intermediate term”
Summary / Conclusion: Analytically, I’m focused on Q4 ’15 and Q1 ’16 in terms of expected growth rates, since those will be the quarters with the easiest “compares," i.e. lapping the precipitous drops in crude oil prices in late ’14 and early ’15. At least so far, the numbers tell me that any price increase is likely to be gradual, and perhaps the $80 late ’15 crude oil estimates by T. Boone Pickens and others might be a little steep right now.
As a caveat for readers, the sector growth estimates change daily and weekly.
“Lower for longer” or “gradual improvement” might be the best way to articulate estimated price of crude oil over the next 12 months.
In late July, early August, readers will be updated on the energy sector growth rates, and at that point Q2 ’16 estimates will be available to look at as well.