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4 Energy Growth Stocks Standing Out This Earnings Season

With reports from 32.8% of the S&P 500 companies out, we are in the thick of Q3 earnings. Meanwhile, only 19.4% of the energy companies belonging to the index have reported their Q3 numbers. According to the latest Earnings Trends, total earnings for these energy firms are up 253.9% from the same period last year on 33.5% higher revenues; 50% of the companies have reported positive earnings surprises so far; with 50% beating revenue estimates.

Moreover, our report shows that energy is the only sector among the 16 representing the S&P 500 index to witness triple-digit earnings growth in Q3.

Hence, it is time for investors to add energy stocks with strong growth potential to their portfolio.

Crude Turns Around in Q3

As per macrotrends, The West Texas Intermediate (WTI) crude saw a 12.2% gain during the third quarter of 2017 after two consecutive quarters of decline this year. Notably, this is the highest quarterly gain since the April-to-June quarter of 2016.

According to The U.S. Energy Information Administration (EIA), average monthly prices for each month of Q3 2017 were higher than the year-ago comparable period. Lower global crude inventory helped ease the crude supply glut concern which primarily supported the oil price rally in the third quarter.

Oversupply Concerns Ease in Q3

Per the EIA, during the July-to-September quarter of this year, worldwide oil inventories declined by 500,000 barrels per day (B/D). With this, the inventory level fell for three quarters in a row.

According to The Oil & Gas Journal, Organization of the Petroleum Exporting Countries (OPEC) produced an average of 32.9 million B/D in the third quarter as compared to last November’s 33.4 million B/D. Thus, it can be safely concluded that the leading crude exporter’s landmark production cut deal primarily supported the draws in global crude inventory.

Oil Rebound Drives Performance  

Major oilfield service firms have reported healthy Q3 numbers so far. Schlumberger Limited’s SLB third-quarter 2017 earnings of 42 cents per share (excluding charges and credits) were in line with the Zacks Consensus Estimate. The bottom line improved from the year-earlier adjusted figure of 25 cents.

Another leading oilfield service player, Halliburton Company HAL, reported better-than-expected profit in the third quarter. The company’s income from continuing operations came in at 42 cents per share, above the Zacks Consensus Estimate of 38 cents — the thirteenth consecutive quarter of outperformance. Moreover, revenues of $5,444 million beat the Zacks Consensus Estimate of $5,318.9 million.

On top of that, key upstream energy player Range Resources Corporation RRC reported third-quarter 2017 adjusted earnings of 5 cents per share which surpassed the Zacks Consensus Estimate of 2 cents. Notably, the company had incurred a loss of 6 cents in the year-ago quarter.

Hence, it is clear that the promising Q3 crude pricing environment supported the top and bottom-line performance of key energy companies.

Let’s Focus on Growth Energy Stocks

Since crude determines the fate of energy companies, the favorable oil price scenario will support Q3 numbers for energy firms that are yet to report results.

However, choosing the right stocks is quite an uphill task. With the help of our proprietary screening criteria, we have shortlisted four energy stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy). These stocks have a Growth Style Score of A or B.

Growth stocks, as the name suggests, offer higher growth potential to investors compared to other stocks in the same category. A primary attribute of growth stocks is that these prefer to invest profits in capital growth projects to develop products and technologies rather than paying dividends.

In particular, our Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with a Growth Style Score of A or B, when combined with a favorable Zacks Rank, offer the best investment opportunities in the growth investing space.

Headquartered in Irving, TX, Exxon Mobil Corporation XOM is the world’s largest publicly traded oil company. The company, set to report third-quarter results on Oct. 27, has a Growth Style Score of B.

Our proven model shows that Exxon Mobil is likely to beat third-quarter earnings because it has an Earnings ESP of +1.91% and a Zacks Rank #2. Our research shows that for stocks with a combination of positive Earnings ESP and a Zacks Rank #1, 2, or 3 (Hold), the chance of delivering a positive earnings surprise is as high as 70%.  

Also, we expect Exxon Mobil to witness year-over-year earnings growth of almost 39% for the July-to-September quarter.

Newpark Resources, Inc. NR, based in The Woodlands, TX, is a leading provider of drilling fluids products that are used in oil fields.

Scheduled to report third-quarter results on Oct. 30, Newpark has an Earnings ESP of +33.33%. The company has a Growth Style Score of B and carries a Zacks Rank #2.

The company’s earnings surprise history looks impressive. Newpark managed to beat the Zacks Consensus Estimate for earnings in three of the last four quarters, the average positive surprise being 70.46%.

We also expect the firm to see year-over-year earnings growth of 123.1% in the quarter.

Ecopetrol SA EC, based in Bogotá, Colombia, operates as an integrated energy player. The company is expected to report quarterly earnings on Nov. 24.

The firm has a Growth Style Score of A and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Also, per our expectations, the company will record year-over-year quarterly earnings growth of 425%.

Headquartered in Denver, CO, Cimarex Energy Co. XEC is a major upstream energy company. The company carries a Zacks Rank #2 and Growth Style Score of B.

Cimarex, with Earnings ESP of +0.29%, is set to report third-quarter results on Nov. 7. Notably, the company surpassed the Zacks Consensus Estimate in each of the prior four quarters, with an average positive earnings surprise of 11.90%.

For the third quarter, Cimarex is expected to post year-over-year earnings growth of 137.2%.

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Ecopetrol S.A. (EC): Free Stock Analysis Report
 
Schlumberger N.V. (SLB): Free Stock Analysis Report
 
Halliburton Company (HAL): Free Stock Analysis Report
 
Newpark Resources, Inc. (NR): Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
 
Range Resources Corporation (RRC): Free Stock Analysis Report
 
Cimarex Energy Co (XEC): Free Stock Analysis Report
 
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