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Oil Stocks Earnings to Watch on Oct 25: VLO, WFT, BHI, RRC

The Q3 earnings season is currently underway with 116 S&P 500 members, which account for 23.2% of the index's total market capitalization, having announced their quarterly results as of Oct 21. On a year-over-year basis, total earnings for these companies inched up 3.3% on 1.8% higher revenues. While 80.2% of these companies delivered positive earnings surprises, 62.9% managed to beat revenue estimates.

Will the Energy Sector Continue to Suffer?

The energy sector has been a drag on the overall market over the past few quarters and the situation is unlikely to change even in Q3. Per the latest Earnings Preview report, the general outlook remains bearish as the sector is expected to register a massive 72.6% year-over-year decrease in earnings due to a 12.2% decline in revenues. Excluding the impact of the energy sector, the S&P 500 Index would witness earnings growth of 3.7% on the back of 2.8% increase in revenues.

Crude Performancein Q3

Given that oil determines the fate of energy companies, it of utmost importance to note the pricing movement of the commodity during Q3. Overall, oil prices recovered significantly from the mid-February lows. This is undoubtedly favorable for upstream energy firms as the improved commodity price improvement should translate into more exploration and production activities. This is evidenced by the substantial increase in the U.S. rig count in recent times.

In fact, Baker Hughes Inc. BHI - the company's data issued since 1944 is as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry - recently declared the rig count for Sep 2016. In the U.S., the total number of rigs increased from the Aug 2016 count owing to a rise in the number of land rigs. This represents the fourth consecutive increase in the U.S. monthly rig count.

We expect increased drilling activities to create more work for oilfield services players and the companies engaged in the manufacture of oil field machineries and equipments.

Although matters seem to be favorable for upstream energy players, refiners are likely to face difficulties. This is because the retail prices of gasoline - the end product of refiners - remains lower than the year-ago comparable period. As a result, refiners are expected to earn less after selling gasoline at lower prices.

However, the overall earnings picture will become clearer as we move further ahead. With more companies set to release their financial numbers this week, we expect a better insight into the performance of the sector. Meanwhile, let's take a look at how these four oil stocks might fare in Q3 when these report their quarterly numbers on Oct 25.

What's in Store for these Oil Stocks?

Leading North American independent refiner and marketer of petroleum products, Valero Energy CorporationVLO is set to report third-quarter 2016 results before the market opens.

In the preceding three-month period, the company reported a positive earnings surprise of 5.94%. Coming to the earnings surprise history, Valero Energy beat estimates in three of the last four quarters with an average positive earnings surprise of 5.42%.

Our quantitative model does not show conclusively that Valero Energy is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat on earnings. Unfortunately, this is not the case here.

This San Antonio, TX-based company has an Earnings ESP of 0.00% and a Zacks Rank #3.

Please note that the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

VALERO ENERGY Price and EPS Surprise

VALERO ENERGY Price and EPS Surprise | VALERO ENERGY Quote

Weatherford International plcWFT - an oilfield services company - is expected to report third-quarter results after the closing bell. Last quarter, the company reported a positive earnings surprise of 6.67%. Moreover, Weatherford posted an average positive surprise of 20.32% in the last four quarters.

Our proven model does not conclusively show that Weatherford will beat estimates this quarter. This is because the company has a Zacks Rank #3 but an Earnings ESP of -8.33%.

WEATHERFORD INT Price and EPS Surprise

WEATHERFORD INT Price and EPS Surprise | WEATHERFORD INT Quote

Oilfield services player Baker Hughes Incorporated is set to report third-quarter 2016 results before the opening bell. Last quarter, the company posted a negative earnings surprise of 50.00%. Moreover, the company posted an average negative earnings surprise of 31.67% in the last four quarters.

Our proven model shows that Baker Hughes is likely to beat earnings because it has the right combination of the two key ingredients - an Earnings ESP of +4.65% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

BAKER-HUGHES Price and EPS Surprise

BAKER-HUGHES Price and EPS Surprise | BAKER-HUGHES Quote

Based in Fort Worth, TX, Range Resources CorporationRRC is set to report third-quarter 2016 results after the closing bell. Last quarter, the upstream energy player delivered a positive earnings surprise of 27.59%. However, the company posted an average negative earnings surprise of 2,410.69% in the last four quarters.

Our proven model shows that Range Resources is likely to beat earnings because it has the right combination of the two key ingredients - an Earnings ESP of +4.17% and a Zacks Rank #3.

RANGE RESOURCES Price and EPS Surprise

RANGE RESOURCES Price and EPS Surprise | RANGE RESOURCES Quote

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WEATHERFORD INT (WFT): Free Stock Analysis Report

VALERO ENERGY (VLO): Free Stock Analysis Report

BAKER-HUGHES (BHI): Free Stock Analysis Report

RANGE RESOURCES (RRC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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