Can These 4 Energy Stocks Beat Wall Street's Q4 Estimates?
The energy sector is facing a challenging earnings season, and so far, about 69.2% of S&P 500 energy companies have already reported their fourth-quarter results. The numbers haven’t been great, as falling oil and gas prices have made it harder for companies to keep up their profits. Now, investors are waiting to see if the remaining energy companies set to report can turn things around or if they’ll struggle just like the others. With so much uncertainty in the sector, all eyes are on these upcoming earnings to see if any surprises are in store.
In the fourth quarter of 2024, there was a sharp decline in oil prices. The average price of West Texas Intermediate crude dropped to $70.69 per barrel, down from the prior year’s figure of $78.41. This downturn was due to a combination of factors — an increased global oil production and a slowdown in demand growth. While OPEC+ maintained its production cuts for most of the year, a surge in output from the United States and other non-OPEC countries led to an overall increase in supply. Additionally, concerns about sluggish economic growth, particularly in developed markets, further dampened demand. At the same time, natural gas prices also saw a decline, with the Henry Hub spot price averaging $2.44 per million British thermal units (“MMBtu”), a decline from $2.74 per MMBtu in the prior year quarter.
The energy sector is going through a rough patch as falling oil and gas prices take a toll on profits. According to the latest Zacks Earnings Trends report, energy companies in the S&P 500 are expected to report a 22.5% drop in earnings compared to the year-ago quarter in 2023.
This is a major setback, especially when you consider that the overall S&P 500 index is expected to grow earnings by 13.4%. If you take energy companies out of the picture, that number would go up to 16.1%, showing just how much the energy sector is weighing down the S&P 500 index.
The revenue numbers tell a similar story. Even though production levels have stayed steady, energy companies have seen their revenues increase only by 2.1% year over year. Meanwhile, the overall S&P 500 index has seen revenues rise 5.5%, showing that other industries are doing much better.
Sectors like technology and finance within the S&P 500’s umbrella have grown their earnings by 24.2% and 19.4%, respectively, while even retail/Wholesale companies have managed a 23.8% increase. In contrast, energy is among the hardest-hit industries, with only aerospace (down 46.4%) and conglomerates (down 17.1%) reporting bigger declines.
Unfortunately, the overall economic environment isn’t making things any easier. The drop in oil and gas prices is squeezing profit margins, and investors are starting to look elsewhere for better returns, especially in high-growth areas like tech and finance. With money flowing out of energy stocks and into other industries, it’s becoming harder for these companies to attract investment. Some firms may try to cut costs or become more efficient, but the road ahead still looks uncertain. Investors who used to count on energy stocks for solid profits might need to adjust their expectations in 2025, as there’s no clear sign of a quick turnaround in oil and gas prices.
With this context in mind, let us examine how the following energy companies are placed ahead of their fourth-quarter earnings releases slated for Feb. 26 and how they are positioned to weather this storm.
Our proprietary model indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.
APA Corporation APA is scheduled to report quarterly earnings after the closing bell. APA, a provider of oil and gas exploration and production, is expected to post impressive earnings despite the sector’s challenges. The chances of the company delivering an earnings beat this time around are high as it currently has an Earnings ESP of +3.97% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
APA’s revenues are likely to have improved in the upcoming quarter. Our model predicts fourth-quarter revenues to increase 4.8%, reaching $2.3 billion compared with $2 billion in the year-ago quarter. This growth can be attributed to the strong revenue contribution from purchased oil and gas sales, which is expected to rise by 31.3% year over year during this quarter. (read more: APA Corporation to Release Q4 Earnings: Here’s What to Expect)
The Zacks Consensus Estimate for the Houston, TX-based company’s earnings is pegged at 97 cents per share, suggesting a 15.65% decrease from the prior-year reported figure.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
APA beat the Zacks Consensus Estimate once in the last four quarters and missed thrice, delivering an average negative earnings surprise of 2.44%. This is depicted in the chart below:
APA Corporation price-eps-surprise | APA Corporation Quote
Ovintiv Inc. OVV is scheduled to report quarterly earnings after the closing bell. The chances of a Denver, CO-based oil and gas exploration and production company delivering an earnings beat this time around are low as it has an Earnings ESP of -1.03% and a Zacks Rank #2 at present.
OVV, along with its subsidiaries, explores, develops, produces, and sells natural gas, oil, and natural gas liquids in the United States and Canada. The company operates in three main segments — USA Operations, Canadian Operations, and Market Optimization. Its key assets include the Permian in west Texas, the Anadarko in Oklahoma, and the Montney region in British Columbia and Alberta. Additionally, Ovintiv owns upstream assets in the Bakken in North Dakota, Uinta in Utah, and Horn River in British Columbia.
The Zacks Consensus Estimate for the company’s earnings is pegged at $1.11 per share, suggesting a 52.77% decrease from the prior-year reported figure. Regarding earnings surprises, OVV’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, delivering an average surprise of 25.40%. This is depicted in the chart below:
Ovintiv Inc. price-eps-surprise | Ovintiv Inc. Quote
Vista Oil & Gas VIST is scheduled to report quarterly earnings after the closing bell. The chances of VIST delivering an earnings beat this time around are low as it has an Earnings ESP of 0.00% and a Zacks Rank #3.
VIST is a major exploration and production company with a significant presence in Vaca Muerta, one of the largest shale oil and gas fields outside North America. The Zacks Consensus Estimate for the company’s earnings is pegged at 90 cents per share, suggesting a 64.29% decrease from the prior-year reported figure. VIST’s earnings beat the Zacks Consensus Estimate once in the last four quarters and missed thrice, delivering an average negative surprise of 22%. This is depicted in the chart below:
Vista Oil & Gas, S.A.B. de C.V. Sponsored ADR price-eps-surprise | Vista Oil & Gas, S.A.B. de C.V. Sponsored ADR Quote
Expand Energy Corporation EXE is scheduled to report quarterly earnings after the closing bell. The chances of VIST delivering an earnings beat this time around are low as it has an Earnings ESP of -10.14% and a Zacks Rank #2 at present.
EXE specializes in acquiring, exploring, and developing properties to produce oil, natural gas, and natural gas liquids from underground reservoirs. Expand Energy has stakes in natural gas resource plays, such as the Marcellus Shale in Pennsylvania’s northern Appalachian Basin and the Haynesville/Bossier Shales in northwestern Louisiana.
The Zacks Consensus Estimate for the Oklahoma City, OK-based oil and gas exploration and production company’s earnings is pegged at 53 cents per share, suggesting a 59.54% decrease from the prior-year reported figure. EXE’s earnings beat the Zacks Consensus Estimate twice in the last four quarters and missed in the other two, delivering an average surprise of 119.49%. This is depicted in the chart below:
Expand Energy Corporation price-eps-surprise | Expand Energy Corporation Quote
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This article originally published on Zacks Investment Research (zacks.com).