The energy sector has given impressive performances in the last few months on improving demand and supply dynamics. The ultra-popular ETFs Energy Select Sector SPDR (XLE – Free Report) , Vanguard Energy ETF (VDE – Free Report) , iShares U.S. Energy ETF (IYE – Free Report) and Fidelity MSCI Energy Index ETF (FENY – Free Report) gained 3.3%, 2.4%, 2.7% and 2.4%, respectively, in the last three months.
The upside has been supported by strong Q3 earnings expectations. This is especially true as total earnings for the sector are expected to be up 136% from the same period last year on 16.7% higher revenues, as per the latest Earnings Trends. In fact, it is once again the major contributor to the S&P 500 earnings and revenue growth in Q3.
Let’s delve into the earnings picture of two oil biggies, Exxon Mobil (XOM – Free Report) and Chevron (CVX – Free Report) , which dominate the above-mentioned funds’ portfolio and have the power to move the funds up or down in the coming days. Both firms are slated to release their earnings before the market opens on Oct 27 and collectively make up for 41.5% for XLE, 40.4% for IYE, 39.3% for FENY and 36.8% for VDE.
According to our surprise prediction methodology, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP is likely to come up with an earnings beat. A Zacks Rank #4 or 5 (Sell rated) is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
What’s in the Cards?
Exxon Mobil has a Zacks Rank #2 and an Earnings ESP of +1.91%, indicating higher chances of beating estimates this quarter. The stock saw a positive earnings estimate revision of a nickel over the past 30 days for the to-be-reported quarter and delivered positive earnings surprises of 8.94% on average over the last four quarters. Further, its earnings are expected to grow an impressive 38.89%. The stock has a solid Growth and Momentum Style Score of B and A, respectively, and a Value Style Score of C.
