With releases from 409 S&P 500 members, the Q1 earnings season is at its tail end. The companies recorded year-over-year earnings growth of 24% on 9.3% higher revenues.
Around 78% of the S&P 500 companies surpassed the Zacks Consensus Estimate for earnings, while 75.6% beat revenue estimates. Notably, 63.3% surpassed the Zacks Consensus Estimate for both earnings and revenues.
Energy to Outperform Others
The elite S&P 500 index is expected to see year-over-year earnings growth of 23.2% in Q1. This growth estimate represents the January to March quarter as a whole, including the companies that have already reported results and have yet to report earnings.
Energy will likely be the key sector backing the index’s outperformance. Excluding Energy, earnings of S&P 500 are expected to decline to 21.5% from 23.2%. In fact, the latest Earnings Preview shows that Energy will outshine all sectors with earnings growth of 73.9%.
Favorable Oil Supports Energy
The favorable crude pricing scenario primarily supported Energy’s outperformance. For the first three months of 2018, oil traded at an average monthly price of $63.70, $62.23, and $62.73 per barrel, respectively. The average monthly price of the commodity never touched $60 through 2015 to 2017. It was the production cut extension deal by the OPEC players through 2018-end that mainly drove the rally in crude.
The fate of all the energy players is related to the movement of oil price. Exploration and production companies will likely gain from the crude rally. Also, drillers and oilfield service companies are expected to gain more contacts from explorers. Midstream energy companies, engaged in transporting and storing of oil and refined petroleum products, will likely record more fee-based revenues from shippers transporting the increased production.
It is to be noted that for January and February of 2018, crude production in the domestic field was recorded at 310,138 thousand barrels and 287,379, respectively — representing a year-over-year improvement from 273,673 and 253,623.
Oil Stocks to Watch
We have chosen four energy players gearing up to report first-quarter 2018 results on May 8.
Headquartered in Denver, CO, Cimarex Energy Co. (NYSE:XEC) managed to surpass the Zacks Consensus Estimate for earnings in each of the last four quarters, the average positive surprise being 13.3%.
Our proven model does not show a beat for Cimarex this earnings season. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
That is not the case here as the upstream energy player carries an Earnings ESP of -0.39% and a Zacks Rank #3.
Headquartered in Houston,Occidental Petroleum Corporation (NYSE:OXY) beat the Zacks Consensus Estimate for earnings in the trailing four quarters.
Our proven model does show a beat for this integrated energy firm. This is because the company has an Earnings ESP of +0.52% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Diamondback Energy, Inc. (NASDAQ:FANG) , headquartered in Midland, TX, also surpassed the Zacks Consensus Estimate for earnings in the prior four quarters.
Our proven model shows that Diamondback is unlikely to beat estimates this earnings season as the upstream energy firm carries a Zacks Rank #3 and an Earnings ESP of -0.57%.
Headquartered in Denver, CO, Centennial Resource Development, Inc. (NASDAQ:CDEV) has an average positive earnings surprise of 128.3% for the trailing four quarters.
Our proven model does not show a beat for Centennial Resource this earnings season. This is because it has an Earnings ESP of 0.00% and a Zacks Rank #3.
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Diamondback Energy, Inc. (FANG): Free Stock Analysis Report
Cimarex Energy Co (XEC): Free Stock Analysis Report
CENTENNIAL RES (CDEV): Free Stock Analysis Report
Occidental Petroleum Corporation (OXY): Free Stock Analysis Report
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