Markets
CXO

Peek Into Oil Q4 Earnings on Feb 21: FTI, CXO, NFX & WLL

An image of a pen on a stock chart
Credit: Shutterstock photo

We have reached the final stretch of the Q4 earnings season, with results on board from 411 S&P 500 members that combined account for more than 88% of the index's total market capitalization. And with 49 S&P 500 members coming up with results this week, one would see Q4 numbers from 92% of the index's total membership by Friday.

According to the latest Earnings Preview , overall earnings for the companies that have already reported are up 8% from the same period last year on 4.9% higher revenues, with 68.9% positive earnings surprises and 54.7% beating revenue estimates.

Energy Finally Turns the Corner

Following eight back-to-back quarters of earnings decline, analysts said that the sector was likely to get better in the fourth quarter and clock its first positive earnings growth after two years. With estimate revisions going up following OPEC's Algeria grandstand, the Oil/Energy sector's earnings were expected to improve 8.8% from the fourth-quarter 2015 levels.

True to the predictions, the sector has come out swinging. For the 69.4% sector components on the S&P 500 index that have reported Q4 results, total earnings are up 14.7% on 3.1% higher revenues. Around 68% of the companies have been successful in beating earnings and revenue estimates.

The Oil/Energy sector's positive growth largely reflects better-than-expected quarterly profit from bellwether ExxonMobil Corp. XOM , which more than offset smaller rival Chevron Corp.'s CVXdisappointing Q4 numbers .

Let's take a look at how oil and gas prices behaved during the fourth quarter.

Q4: Rebounding Oil & Natural Gas Prices

The OPEC deal and extreme weather conditions engineered a hefty rise in oil and gas prices during the fourth quarter.

A historic OPEC production cut agreement, together with help from non-OPEC producers saw oil prices end the year at $53.72 a barrel, representing a gain of 11.4% sequentially and 45% for the year.

Meanwhile, natural gas embarked on its own upward journey, with futures jumping around 25% in just the fourth quarter. Ending the year at $3.724 per million Btu (MMBtu) - up 59% from 2015 - the heating fuel was buoyed by a cold snap that translated into strong demand.

Stocks to Watch for Earnings on Feb 21

Let's see what's in store for four energy companies this reporting cycle.

A leading manufacturer and supplier of technology solutions for the energy industry, TechnipFMC plcFTI is expected to report fourth-quarter 2016 results around Feb 21.

In the third quarter of 2016, this London-headquartered oil drilling equipment maker managed to beat estimates, helped by its high-quality portfolio of offshore project solutions and successful cost reduction efforts.

But coming to earnings surprise history, the company has a bad record: it missed estimates in three of the last four quarters.

However, an earnings beat looks likely for TechnipFMC this time around. This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

For the quarter to be reported, TechnipFMC has an Earnings ESP of +20.00%, while it carries a Zacks Rank #1. The company's top rank, when combined with a positive ESP, makes us confident of an earnings beat. You can see the complete list of today's Zacks #1 Rank stocks here .

Meanwhile, 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.

FMC Technologies, Inc. Price and EPS Surprise

FMC Technologies, Inc. Price and EPS Surprise | FMC Technologies, Inc. Quote

We also have upstream entity Concho Resources Inc.CXO coming up with fourth-quarter 2016 results tomorrow. Coming to the earnings surprise history, the Midland, TX-based company - which is a focused on the lucrative Permian Basin - has a mixed track of having outperformed estimates in two of the last four quarters.

Powered with the right combination of the two key ingredients - an Earnings ESP of +66.67% and Zacks Rank #3 - our proven model shows that an earnings beat is expected for Concho Resources in the to-be-reported quarter.

Concho Resources Inc. Price and EPS Surprise

Concho Resources Inc. Price and EPS Surprise | Concho Resources Inc. Quote

Newfield Exploration Co.NFX is another TX-based energy player coming up with fourth-quarter numbers on Tuesday.

Newfield is an independent energy company engaged in the exploration and production (E&P) of crude oil and natural gas. Although the Gulf of Mexico is Newfield's largest area of operation, the company is also active in the onshore Gulf Coast, the Mid-Continent (primarily Oklahoma) and the Rocky Mountain regions.

Coming to the earnings surprise history, Newfield has a good track: it's gone past estimates in three of the last four quarters at an average rate of 754.83%.

We expect Newfield to keep the streak alive by beating earnings expectations in the to-be-reported quarter as well. This is because the company has a Zacks Rank #3 and has an Earnings ESP of +2.63%. (Read more: Newfield Exploration Q4 Earnings: Is a Beat in Store? )

Newfield Exploration Company Price and EPS Surprise

Newfield Exploration Company Price and EPS Surprise | Newfield Exploration Company Quote

Lastly, there is Denver, CO-based domestic oil and gas explorer Whiting Petroleum Corp.WLL coming up with fourth-quarter numbers tomorrow.

As far as earnings surprises are concerned, the company is on a bit of a slippery surface, having missed the Zacks Consensus Estimate in each of the last four reports.

Our model does not indicate that the company - with operations primarily in the Rocky Mountains region of the U.S. - is likely to beat on earnings this time around too, as it has a Zacks Rank #3 and an Earnings ESP of 0.00%. While a Zacks Rank #3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult. (Read more: Can Whiting Petroleum Pull a Surprise in Q4 Earnings? )

Whiting Petroleum Corporation Price and EPS Surprise

Whiting Petroleum Corporation Price and EPS Surprise | Whiting Petroleum Corporation Quote

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>

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

FMC Technologies, Inc. (FTI): Free Stock Analysis Report

Chevron Corporation (CVX): Free Stock Analysis Report

Exxon Mobil Corporation (XOM): Free Stock Analysis Report

Newfield Exploration Company (NFX): Free Stock Analysis Report

Concho Resources Inc. (CXO): Free Stock Analysis Report

Whiting Petroleum Corporation (WLL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

CXO FTI XOM CVX

Other Topics

Earnings Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More