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Do Analysts Expect a Rebound in Energy Earnings in 2016?

By John Butters, Senior Earnings Analyst
Dec 24, 2015

Although there has been a slight increase this past week, the price of crude oil has declined by 17% since the start of the fourth quarter (to $37.50 yesterday from $45.09 on September 30). As the price of oil has fallen, analysts have also lowered earnings estimates for companies in the S&P 500 Energy sector for the fourth quarter. The aggregate earnings estimate for the S&P 500 Energy sector for the fourth quarter has declined by 15% since September 30 (to $7.5 billion from $8.9 billion).

However, are analysts more optimistic about the prospects for earnings for the Energy sector beyond the fourth quarter? Have analysts increased or decreased earnings estimates for companies in this sector for 2016?

It appears analysts are pessimistic on earnings for the Energy sector for 2016 as well, based on revisions to earnings estimates. The aggregate earnings estimate for the Energy sector for 2016 has also fallen by 15% since September 30 (to $42.9 billion from $50.7 billion). As a result, the Energy sector is now expected to report a year-over-year decline in earnings of 8% in 2016, compared to an expectation for earnings growth of 9% in earnings back on September 30.

At the company level, 18 of the 40 companies (or 45%) in this sector have seen EPS estimates for 2016 cut by 20% or more since September 30, led by Helmerich & Payne (to -$0.34 from $0.07), Noble Energy (to -$0.20 from $0.05), Southwestern Energy (to -$0.12 from $0.41), CONSOL Energy (to -0.09 from $0.49), and Baker Hughes (to -$0.05 from $0.31). However, the downward estimate revisions to estimates for Exxon Mobil (to $3.71 from $4.30), Chevron (to $3.77 from $4.42), and ConocoPhillips (to $0.18 from $1.17) have been the largest contributors to the decrease in the earnings growth rate for the sector over this time frame.

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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