The Q1 earnings season is picking up pace with several companies reporting financial results this week. In fact, as many as 191 S&P 500 members are set to release their quarterly results this week.
So far, 95 S&P 500 members - 24.9% of the index's total market capitalization - have reported Q1 results. Per the Earnings Trends report (dated Apr 21, 2017), total earnings for these companies increased 14.3% due to 4.6% growth in revenues, both on a year-over-year basis. While 72.6% companies beat earnings estimates, 4.6% posted better-than-expected revenues.
We would like to remind investors that the Oil/Energy sector finally turned the corner in Q4 after a prolonged period of weakness. The improvement in the sector's performance drove the aggregate growth picture for the S&P 500 Index. In fact, the October-December period of 2016 turned out to be rather good for Energy companies. Positives like the OPEC deal and extreme weather conditions resulted in a significant rise in oil and gas prices during Q4.
Most analyses indicates a better Q4 and first positive earnings growth for the sector after eight consecutive quarters of earnings declines over two years. With estimate revisions going up following OPEC's Algeria accord, the Oil/Energy sector's Q4 earnings were anticipated to improve substantially from the prior-year levels. True to the predictions, the sector came out swinging. For the sector components enlisted on the S&P 500 Index, total Q4 earnings grew 17.1% on 2.0% higher revenues.
The picture looks rather encouraging for the Q1 earnings season as well. This is not surprising as both oil and gas fell to multi-year lows in the year-ago period. In fact, the Energy sector is set to turn around from a nominal loss in the year-earlier period to improving positive earnings this quarter.
Importantly, our analysis shows that the aggregate dollar amount of earnings increase for the Energy sector is the highest of all the16 Zacks sectors. In fact, the sector is expected to earn a total of $7.7 billion in Q1, comparing favorably with a loss $1.6 billion in the year-earlier quarter. In Q1, the top line is likely to display growth of 32.4% from the year-ago comparable levels.
With several companies slated to report their quarterly results in the coming days we expect to get a clearer idea about the Q1 earnings cycle.
Stocks to Watch for Earnings on Apr 25
Let's see what's in store for these four energy companies, which are expected to come up with Q1 numbers on Apr 25.
One of the largest oilfield services company, Baker Hughes Inc.BHI is expected to report results before the opening bell.
In Q4, this Houston, TX-based company missed estimates due to postponement of projects and lesser work in the North Sea and Brazil.
Coming to earnings surprise history, the company has a disappointing record. It lagged estimates in three of the last four quarters.
Moreover, an earnings beat looks unlikely for Baker Hughes this time around. This is because our proven model shows that 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.
For the quarter to be reported, Baker Hughes has an Earnings ESP of -9.52%, while it carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, a negative Earnings ESP makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Simultaneously, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Baker Hughes Incorporated Price and EPS Surprise
SEACOR Holdings, Inc.CKH owns, operates, invests in, and markets equipment in the offshore oil and gas, shipping, and logistics industries worldwide.
Our proven model does not conclusively show that SEACOR Holdings is likely to beat on earnings this time. The company has a Zacks Rank #2 but an Earnings ESP of 0.00%.
SEACOR Holdings, Inc. Price and EPS Surprise
Superior Energy Services, Inc.SPN is expected to report Q1 results after the closing bell. Our proven model does not conclusively show that the company is likely to beat the Zacks Consensus Estimate this quarter. The company has an Earnings ESP of -1.64% and a Zacks Rank #3 (Hold). While a favorable Zacks Rank increases the predictive power of ESP, the company's negative Earnings ESP makes surprise prediction difficult.
Last quarter, Superior Energy Services had incurred an adjusted loss of 74 cents per share, narrower than the Zacks Consensus Estimate of a loss of 76 cents. The company had a positive earnings surprise of 2.63% last quarter. Moreover, the company outpaced the Zacks Consensus Estimate in three out of the last four quarters.
Superior Energy Services, Inc. Price and EPS Surprise
Valero Energy CorporationVLO the largest independent refiner and marketer of petroleum products in the U.S., is set to report Q1 earnings before the opening bell. The company is one of the major independent retailers of refined petroleum products in central and southwestern U.S. and eastern Canada.
In Q4, this San Antonio, TX-based company reported better-than-expected earnings. We do not expect Valero Energy to beat expectations in Q1. Though the company's Zacks Rank #3 increases the predictive power of ESP, its Earnings ESP of -1.67% makes surprise prediction difficult.
Valero Energy Corporation Price and EPS Surprise
You can see the complete list of today's Zacks #1 Rank stocks here .
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report