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Earnings growth story not all negative for S&P 500 Energy sector for Q4

By John Butters, Senior Earnings Analyst
Feb 6, 2015

During the past week, the price of crude oil increased by 4.6% (to $50.48 from $48.24). While a continuation of this price increase may boost the earnings of S&P 500 Energy sector companies in Q1, it will not be of any help to the earnings of Energy companies for Q4. As of today, the Energy sector is reporting the largest year-over-year decline in earnings of all ten sectors in the S&P 500 at -21.5%. 

However, looking deeper into the sector, the earnings growth news is not all negative. At the subindustry level, two of the seven sub-industries in the sector are actually reporting double-digit earnings growth: Oil & Gas Equipment & Services and Oil & Gas Refining & Marketing.

The Oil & Gas Equipment & Services sub-industry is reporting the highest earnings growth of all seven sub-industries in the Energy sector at 22.9%. All six companies in this sub-industry are expected to report or have reported EPS growth for the quarter, led by Baker Hughes ($1.44 vs. $0.62). It is interesting to note that these six companies have seen an average price decline of 3.5% since December 31, compared to an average price increase of 1.7% for all the companies in the Energy sector.

The Oil & Gas Refining & Marketing sub-industry is reporting the second highest earning growth of all seven sub-industries in the Energy sector at 18.5%. All four companies in this sub-industry are expected to report or have reported EPS growth for the quarter, led by Tesoro ($1.44 vs. $0.04). These four companies have seen an average price increase of 10.6% since December 31, compared to an average price increase of 1.7% for all the companies in the Energy sector during this time.

Looking ahead to 2015, these two sub-industries are not expected to see earnings growth continue. For 2015, the Oil & Gas Equipment & Services sub-industry is projected to report a year-over-year decline in earnings of 33.7%, while the Oil & Gas Refining & Marketing sub-industry is projected to report a yearover-year decrease of 11.6%. The only sub-industry in the Energy sector currently expected to report year-over year earnings growth in 2015 is the Oil & Gas Transportation & Storage sub-industry (13.8%). 

Read more about earnings trends in this edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.

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