Oil Stock Earnings Previews


By Louis Navellier

With crude oil prices pushing $80 a barrel once more, Wall Street is closely watching energy stocks right now. Companies that have managed to post strong sales even amid weak demand could really take off, as crude moves upwards in price.

To help you find the best energy stocks to buy now, here are my takes on six  oil companies about to report earnings and how I expect them to perform:

Oil Stock #1 – BP (BP)

Reports Earnings: Tuesday, October 27

Things have certainly slowed down for BP (BP) since the company posted a record quarterly profit of $6.59 billion in the first quarter of 2008, as oil prices crept up to $120 a barrel. However, the stock is holding its own after profits bottomed out in Q4 of 2008. BP has been slowly edging earnings back in the right direction, but has a long way to go.

The Verdict: As with SLB, I am encouraged that BP is headed in the right direction, but it’s a bit premature for me to recommend this stock as a good investment. I rate BP a “Hold” for now.

Oil Stock #2 – Valero Energy (VLO)

Reports Earnings: Tuesday, October 27

On the surface, things look pretty good at Valero Energy (VLO). The company has topped Wall Street’s earnings estimates for each of the last four quarters, with an average earnings surprise of more than 13%. However, the company swung from a 59 cent profit in the first quarter of 2009 to a 48 cent loss in the second quarter of 2009. Valero beat estimates, yes. But just because the numbers weren’t as bad as expected doesn’t mean they were any good.

The Verdict: You can’t trust a company that can’t post a profit. I rate Valero a sell, and I advise you to unload your shares before this company reports earnings.

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Oil Stock #3 – ConocoPhillips (COP)

Reports Earnings: Wednesday, October 28

ConocoPhillips (COP) is a very complicated call. The company has posted a strong record of earnings surprises, and has topped expectations for each of the last four quarters by as much as 30%. Analysts are revising their estimates upwards for COP this quarter in anticipation of good numbers this time around, too. But my analysis shows that sales and margins are poor for this company. As a result, the buying pressure behind shares is very anemic and volume is low.

The Verdict:
ConocoPhillips could very well post decent Q3 profits, since my in-depth stock analysis indicates that COP has a good record of earnings surprises and earnings revisions are favorable. However, on the whole, my screening system gives this company a failing grade, and I think you’re better off steering clear of ConocoPhillips until its fundamentals improve across the board.

Oil Stock #4 – Hess (HES)

Reports Earnings: Wednesday, October 28

Hess (HES) knocked it out of the park last quarter, posting earnings of 40 cents a share when Wall Street was looking for the company to barely break even. Things are looking up this time around too, with many analysts revising their earnings higher. However, sales growth is still poor and weighing on Hess’ bottom line.

The Verdict:
I expect a nice earnings report from Hess, and shares could see a decent short-term bounce. I’m still on the fence about HES. For now, I rank this stock a “Hold.”

Oil Stock #5 – Exxon Mobil (XOM)

Reports Earnings: Thursday, October 29

While it’s true that crude oil prices have dropped significantly compared to 2008, some oil companies have managed to turn things around and move back into growth mode. Not Exxon Mobil (XOM). Earnings have declined each of the last four quarters—with XOM’s Q2 numbers missing expectations by nearly 20%. That’s not a good sign, especially compared to competitors.

The Verdict: Exxon Mobil is one of the largest companies in the world and a very widely held stock. However, this stock is not a good investment right now. I rate XOM a “Sell.”

Oil Stock #6 – Chevron (CVX)

Reports Earnings: Friday, October 30

Chevron (CVX) has impressive margins and an excellent return on equity right now. And after a poor Q1 performance that resulted in a -11% earnings surprise, it looks like the company’s bottom line is firming up nicely. Cash flow is getting better, and investors are starting to warm up to this stock once more.

The Verdict: Though Chevron is improving, oil prices are much softer than they were in the third quarter of 2008, and that sets a pretty high bar for year-over-year comparisons. As a result, I expect CVX to have some short-term difficulty. I currently rate Chevron a “Hold.”

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Article printed from InvestorPlace Media, http://investorplace.com/2009/10/exxon-xom-oil-stocks-cvx-chevron-cop-slb-hes-earnings-preview/.

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